A Puzzle of Excessive Equity Risk Premium and the Case of Poland
AbstractThe 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.
|Journal series||E-Finanse, ISSN 1734-039X, (B 14 pkt)|
|Publication size in sheets||0.5|
|Keywords in English||risk premium, Mehra-Prescott model, risk averse, financial markets, general equilibrium|
|Score|| = 14.0, 17-12-2019, ArticleFromJournal|
= 14.0, 17-12-2019, ArticleFromJournal
|Citation count*||1 (2020-08-08)|
* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.