Stochastic Discount Factor Models and the Equity Premium Puzzle

Abstract

One view of the equity premium puzzle is that in the standard asset-pricing model with time-separable preferences, the volatility of the stochastic discount factor, for plausible values of risk aversion, is too low to be consistent with consumption and asset return data. We adopt this characterization of the puzzle, due to Hansen and Jagannathan (1991), and… (More)

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Cite this paper

@inproceedings{Otrok2002StochasticDF, title={Stochastic Discount Factor Models and the Equity Premium Puzzle}, author={Christopher Otrok and Balaguru Ravikumar and Charles H. Whiteman}, year={2002} }