Xu, Weidong; Li, Hongyi; Wu, Chongfeng - In: Annals of Economics and Finance 12 (2011) 2, pp. 217-231
This paper investigates the implications of model uncertainty for the equity premium in a stochastic volatility model. We consider a general equilibrium setting with one representative agent who has a stochastic differential utility. The results show that the equilibrium equity premium consists...