Equity premium with habits, wealth inequality and background risk

Artikel

In an exchange economy with endowment inequality, we investigate how preferences with external habits affect the equity risk premium. We show that the dynamics of external additive habits with wealth inequality are complex when a background risk is present. It is ambiguous whether wealth inequality will increase or decrease the equity premium even when the income uncertainty is low. This result extends literature by suggesting that wealth inequality has a small role in explaining asset pricing puzzles.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 14 ; Year: 2021 ; Issue: 7 ; Pages: 1-15 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: asset prices ; background risk ; habits ; wealth inequality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Giannikos, Christos ; Koimisis, Georgios
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2021

Further information

• DOI: doi:10.3390/jrfm14070321
• Handle: http://hdl.handle.net/10419/258425
• Last update: 10.03.2025, 11:41 AM CET