Discussion paper

DP5017 Explaining The Equity Risk Premium

We develop a simple overlapping generations model in which the young have a choice in investing in equities and index-linked bonds. Projections of share price uncertainty over a 30-year period show that the risk associated with such a long-term investment predicts an equity premium that matches historical values.

£6.00
Citation

Minford, P and L Lungu (2005), ‘DP5017 Explaining The Equity Risk Premium‘, CEPR Discussion Paper No. 5017. CEPR Press, Paris & London. https://cepr.org/publications/dp5017