to the data. Conditional on reasonable risk aversion, we find that the data is consistent with infrequent portfolio …

diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, different … generally share a joint exposure to systematic risk. Equilibrium in this case can be approximated by a concave relation between … market beta. We estimate that the market-risk premium is at least five to six percent per annum for the average stock …