The equity premium and the risk free rate: A cross country, cross maturity examination
This paper examines the relationship between the equity premium and the risk free rate at three different maturities using post 1973 data for a panel of 7 OECD countries. We show the existence of subsample instabilities, of some cross country differences and of inconsistencies with the expectations theory of the term structure. We perform simulations using a standard consumption based CAPM model and demonstrate that the basic features of Mehra and Prescott's (1985) puzzle remain, regardless of the time period, the investment maturity and the country considered. Modifications of the basic setup are also considered.
Year of publication: |
1995-04
|
---|---|
Authors: | Canova, Fabio ; Nicolo, Gianni De |
Institutions: | Department of Economics and Business, Universitat Pompeu Fabra |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Stock returns, term structure, inflation and real activity: An international perspective
Canova, Fabio, (1997)
-
STOCK RETURNS, TERM STRUCTURE, INFLATION, AND REAL ACTIVITY: ANINTERNATIONAL PERSPECTIVE
Canova, Fabio, (2000)
-
Monetary disturbances matter for business fluctuations in the G-7
Canova, Fabio, (2002)
- More ...