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PERSISTENT CATASTROPHIC SHOCKS AND EQUITY PREMIUMS: A NOTE
Published online by Cambridge University Press: 03 April 2013
Abstract
This note demonstrates analytically that a persistent catastrophic shock on endowment growth, even if moderate, yields negative equity premiums when a representative agent is relatively prudent. In particular, it derives the minimum persistence necessary to have zero equity premiums.
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- Copyright © Cambridge University Press 2013
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