Risks after Disasters: A Note on the Effects of Precautionary Saving on Equity Premiums

Shiba Suzuki

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper studies the effects on equity premiums of grisks after disasters h, which are defined as a sharp rise in volatility of real per capita GDP growth rates immediately following disasters. This paper makes three contributions. First, we analytically demonstrate that if and only if the degree of relative prudence is higher than 2, risks after disasters decrease equity premiums. Second, we find that the differences between equity premiums with and without risks after disasters are quantitatively significant. Third, equity premiums are still higher in the case of disaster than without a disaster.

Date: 2009-03
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http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-040.pdf (application/pdf)

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Journal Article: Risks after disasters: a note on the effects of precautionary saving on equity premiums (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd08-040

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