Contributions

  • Mehra, Rajnish. - Contributor
  • National Bureau of Economic Research. - Contributor

Publication

2007 - National Bureau of Economic Research, Cambridge, Mass, Massachusetts

Language

English

Word Count

25,250 words, Guess

Page Count

101 pages

Identifiers

Description

This essay reviews the family of models that seek to provide aggregate risk based explanations for the empirically observed equity premium. Theories based on non-expected utility preference structures, limited financial market participation, model uncertainty and the small probability of enormous losses are detailed. We impose the additional requirements that candidate models yield consistent inter temporal portfolio choice and that a representative agent can be constructed which is independent of the underlying heterogeneous economy's initial wealth distribution. While many models are able to replicate a wide variety of financial statistics including the premium, few satisfy these latter criteria as well.

Subjects

Series Statement

  • NBER working paper series -- no. 13220.
  • Working paper series (National Bureau of Economic Research) -- working paper no. 13220.

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