The equity risk premium (ERP) in BRIC markets is, on average, significantly higher than that in the US market. This paper employs an endowment economy with recursive preferences and long-run risk to explain the ERP generated by a portfolio of BRIC equity indices. The combination of recursive preferences and long-run risk partially explains the BRIC ERP. It turns out that there is a puzzle with respect to BRIC data as well. This holds even if we account for high levels of aversion to consumption and utility risk and for the empirically observed autoregressive structure of US consumption and BRIC dividend growth.
Curatola, G., Donadelli, M., Grüning, P. (2015). Matching the BRIC equity premium: A structural approach. EMERGING MARKETS REVIEW, 22, 65-75 [10.1016/j.ememar.2014.12.001].
Matching the BRIC equity premium: A structural approach
Curatola, Giuliano;
2015-01-01
Abstract
The equity risk premium (ERP) in BRIC markets is, on average, significantly higher than that in the US market. This paper employs an endowment economy with recursive preferences and long-run risk to explain the ERP generated by a portfolio of BRIC equity indices. The combination of recursive preferences and long-run risk partially explains the BRIC ERP. It turns out that there is a puzzle with respect to BRIC data as well. This holds even if we account for high levels of aversion to consumption and utility risk and for the empirically observed autoregressive structure of US consumption and BRIC dividend growth.
| File | Dimensione | Formato | |
|---|---|---|---|
|
EMR_BRIC_EquityPremium.pdf
non disponibili
Tipologia:
PDF editoriale
Licenza:
NON PUBBLICO - Accesso privato/ristretto
Dimensione
462.19 kB
Formato
Adobe PDF
|
462.19 kB | Adobe PDF | Visualizza/Apri Richiedi una copia |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
https://hdl.handle.net/11365/1068595