The Term Structure and the Equity Premium Puzzle: A Note

Publication Date
Financial Markets Group Discussion Papers DP 89
Publication Authors

The importance of the term structure of real interest in determining the sign and the magnitude of the equity premium has received little attention in the literature related to Mehra-Prescott puzzle. The decomposition of the equity premium into a term premium and a payoff uncertainty premium is studied in the context of a pure exchange economy, calibrating the model over different countries and periods. 

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