Dissecting the Equity Premium

Autor: Beason, Tyler, Schreindorfer, David
Rok vydání: 2022
Předmět:
Zdroj: Journal of Political Economy. 130:2203-2222
ISSN: 1537-534X
0022-3808
DOI: 10.1086/720396
Popis: We use option prices and realized returns to decompose risk premia into different parts of the return state space. In the data, 8/10 of the average equity premium is attributable to monthly returns below -10%, but returns below -30% matter very little. In contrast, prominent asset pricing models based on habits, long-run risks, rare disasters, undiversifiable idiosyncratic risk, and constrained intermediaries attribute the premium predominantly to returns above -10% or to the extreme left tail. We show that the discrepancy arises from an unrealistically small price of risk for stock market tail events in the models. Accepted version
Databáze: OpenAIRE
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