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Risk Premia and Term Premia in General Equilibrium / Andrew B. Abel.
- Format:
- Book
- Author/Creator:
- Abel, Andrew B.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w6683.
- NBER working paper series no. w6683
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1998.
- Summary:
- The equity premium consists of a term premium reflecting the longer maturity of equity relative to short-term bills, and a risk premium reflecting the stochastic nature of equity payoffs and the deterministic nature of payoffs on reckless bills. This paper analyzes term premia and the risk premia in a general equilibrium model with catching up with the Joneses preferences and a novel formulation of leverage. Closed-form solutions for moments of asset returns are derived. First-order approximations illustrate the effects of parameters and provide an algorithm to match the means and variances of the riskless rate and the rate of return on equity.
- Notes:
- Print version record
- August 1998.
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