The interaction between the equity premium and the risk-free rate

Simon Grant; John Quiggin

doi:10.1016/S0165-1765(00)00280-9

The interaction between the equity premium and the risk-free rate

Simon Grant, John Quiggin

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

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	https://doi.org/10.1016/S0165-1765(00)00280-9
Publication status	Published - Oct 2000

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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.",

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AB - 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.

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The interaction between the equity premium and the risk-free rate

Abstract

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