Article ID Journal Published Year Pages File Type
5059289 Economics Letters 2014 4 Pages PDF
Abstract
In this note, we consider the effect on equity premiums of a representative household's subjective expectations during disasters. In particular, we focus on the effect of doubt during disasters. We derive analytical solutions of equity premiums in the model of power utility function and conduct numerical exercises of the model of the recursive utility function. Our contribution is to demonstrate that doubt during disasters-even mild ones-generates high equity premiums.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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