A new methodology for studying the equity premium

Elie Appelbaum and Parantap Basu

Working Papers from York University, Department of Economics

Abstract: This paper provides a new framework for the derivation and estimation of consumption and equity premium functions. Applying duality in a dynamic context, we show that equity premium and consumption functions can be easily obtained from the indirect utility function. Our new framework, therefore, does not require explicit specification of underlying consumer preferences. Using aggregate US data (1929–2000) we estimate the consumption and equity premium functions using a nonparametric technique. We find that the model does well in explaining the observed smooth consumption patterns and does reasonably well in explaining the high mean and volatility of equity premia.

Keywords: Consumption function; Equity premium; Moments (search for similar items in EconPapers)
Pages: 18 pages
Date: 2010-11
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.springerlink.com/content/605265g1u15r2223/

Related works:
Journal Article: A new methodology for studying the equity premium (2010)
Working Paper: A New Methodology For Studying The Equity Premium (2004)
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:yca:wpaper:2010_3

Access Statistics for this paper

More papers in Working Papers from York University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Support ( this e-mail address is bad, please contact ).