How much of the equity risk premium puzzle can be attributed to the insecure property rights of shareholders? This paper develops a version of the CCAPM with insecure property rights (stochastic taxes). The model implies that the cur- rent expected equity premium can be reconciled with a coe¢ cient of relative risk aversion of 3:76 , thus resolving the equity premium puzzle.
February 11, 2013
2013. Working Papers
(revised from working paper #2009-01)