Futures market approach to understanding equity premium puzzle

Minseong Kim

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, another factor that affects equity risk premium is derived from a simple classical monetary model, which basically adds back labor-leisure to a simple consumption-only consumption-based asset pricing model. If every present/future good is traded at time $t=0$, just as in traditional Arrow-Debreu general equilibrium models and understanding bonds as essentially trading labor with future goods, it is inevitable that risk-free bonds have lower interest rate than ideal risk-free bonds of classical monetary models.

Keywords: equity premium puzzle; Arrow-Debreu; futures market; equity risk premium (search for similar items in EconPapers)
JEL-codes: E21 E44 G12 G13 (search for similar items in EconPapers)
Date: 2016-03-15
New Economics Papers: this item is included in nep-mac and nep-upt
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