Disasters and Recoveries

@inproceedings{Gourio2007DisastersAR,
  title={Disasters and Recoveries},
  author={François Gourio},
  year={2007}
}
  • François Gourio
  • Published 2007
Twenty years ago, Thomas A. Rietz (1988) showed that infrequent, large drops in consumption make the theoretical equity premium large. Recent research has resurrected this ‘disaster’explanation of the equity premium puzzle. Robert J. Barro (2006) measures disasters during the XXth century, and …nds that they are frequent and large enough, and stock returns low enough relative to bond returns during disasters, to make this explanation quantitatively plausible. Xavier Gabaix (2007) extends the… CONTINUE READING
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