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Ambiguity and the historical equity premium.

Abstract:

This paper assesses the quantitative impact of ambiguity on the historically observed equity premium. We consider a Lucas-tree pure—exchange economy with a single agent where we introduce two key non-standard assumptions. First, the agent’s beliefs about the dividend/consumption process is ambiguous, i.e., she is uncertain about the exact probability distribution governing the realization of future dividends and consumption. Second, the agent’s preferences are sensitive to this ambiguity, a p...

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Authors


Fabrice Collard More by this author
Sujoy Mukerji More by this author
Kevin Sheppard More by this author
Jean-Marc Tallon More by this author
Volume:
550
Series:
Discussion paper series
Publication date:
2011-05-05
URN:
uuid:af18d391-afa8-4ebc-a9b3-aed98a35ab50
Local pid:
oai:economics.ouls.ox.ac.uk:15184
Language:
English

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