A Puzzle of Excessive Equity Risk Premium and the Case of Poland

Paweł Kliber

Abstract

The article presents a historical review of the literature related to the empirical problem of excessive risk premium. The risk premium (the difference between the return on equities and risk-free rate) observed in financial markets cannot be reconciled with theoretical models of financial markets - it is too high ("excessive"). We present the original model from the seminal work of Mehra and Prescott (1985), where this problem has been signaled. The article gives an overview of the main trends in the literature concerning this problem, of the proposed solutions and of the extension to the model. Finally, we consider the problem in the Polish context, estimating the original Mehra-Prescott model using data from the Polish financial market.
Author Paweł Kliber (WIiGE / KE)
Paweł Kliber,,
- Department of Econometrics
Journal seriesE-Finanse, ISSN 1734-039X, (B 14 pkt)
Issue year2016
Vol12
No1
Pages1-11
Publication size in sheets0.5
Keywords in Englishrisk premium, Mehra-Prescott model, risk averse, financial markets, general equilibrium
DOIDOI:10.14636/1734-039X_12_1_001
URL http://e-finanse.com/archives/?number=44&id=2
Languageen angielski
Score (nominal)14
Score sourcejournalList
ScoreMinisterial score = 14.0, 17-12-2019, ArticleFromJournal
Ministerial score (2013-2016) = 14.0, 17-12-2019, ArticleFromJournal
Citation count*1 (2020-08-08)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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