Abstract:
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 current expected equity premium can be reconciled with a coefficient of relative risk aversion of 3.76, thus resolving a substantial part of the equity premium puzzle.
Publication date:
May 20, 2014
Publication type:
Journal Article
Citation:
Economic Theory Bulletin, 3(2), 2014
