Abstract
The equity premium arises from the interaction between the atemporal risk premium for equity, the risk-free rate of intertemporal substitution and the impact of risk on the precautionary motive for saving. Depending on parameter values, the equity premium may either be increased or reduced by the presence of undiversifiable background risk.
| Original language | English |
|---|---|
| Pages (from-to) | 71-79 |
| Number of pages | 9 |
| Journal | Economics Letters |
| Volume | 69 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Oct 2000 |