The Equity Premium Puzzle and the Riskfree Rate Puzzle
Philippe Weil
No 2829, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper studies the implications for general equilibrium asset pricing of a recently introduced class of Kreps-Porteus non-expected utility preferences, which is characterized by a constant intertemporal elasticity of substitution and a constant, but unrelated, coefficient of relative risk aversion. It is shown that the solution to the "equity premium puzzle" documented by Mehra and Prescott [19851 cannot be found, for plausibly calibrated parameter values, by simply separating risk aversion from intertemporal substitution. Rather, relaxing the parametric restriction on tastes implicit in the time-addictive expected utility specification and adopting Kreps-Porteus preferences in the direction of "more realism" is likely to add a "riskfree rate puzzle" to Mehra's and Prescott's "equity premium puzzle."
Date: 1989-01
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (321)
Published as "The Equity Premium Puzzle and the Risk-Free Rate Puzzle", Journal of Monetary Economics, Vol. 24, no. 3 (1989): 401-422.
Downloads: (external link)
http://www.nber.org/papers/w2829.pdf (application/pdf)
Related works:
Working Paper: The Equity Premium Puzzle and the Risk-Free Rate Puzzle (1997) 
Journal Article: The equity premium puzzle and the risk-free rate puzzle (1989) 
Working Paper: The Equity Premium Puzzle and the Riskfree Rate Puzzle (1989) 
Working Paper: The Equity Premium Puzzle and the Riskfree Rate Puzzle (1989) 
Working Paper: The Equity Premium Puzzle and the Riskfree Rate Puzzle (1989)
Working Paper: The Equity Premium Puzzle and the Riskfree Rate Puzzle (1989)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:2829
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2829
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().