Proceedings of the 2018 International Symposium on Social Science and Management Innovation (SSMI 2018)

A Long Run Risks Model with Rare Disaster: An Empirical Test in the American Consumption Data

Authors
Xiaoyuan Wang
Corresponding Author
Xiaoyuan Wang
Available Online February 2019.
DOI
10.2991/ssmi-18.2019.42How to use a DOI?
Keywords
Equity risk premium; Economists strive; consumption growth rate.
Abstract

Equity risk premium is a popular area of research in the past twenty years. Economists strive to find a model that can both explain the equity risk premium and achieve asset pricing. Long run risk model and risk model with disaster are two mainstream model for equity risk premium. In this paper the two model will be combined, with the assumption that the expected return rate is correlated with consumption growth rate. In this paper the explicit solution for equity risk premium is devised theoretically, and is then compared with existing combined model. The proposed model can explain equity risk premium, better than the traditional long run risk model, as well as be used for asset pricing, matching actual data.

Copyright
© 2019, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the 2018 International Symposium on Social Science and Management Innovation (SSMI 2018)
Series
Advances in Economics, Business and Management Research
Publication Date
February 2019
ISBN
978-94-6252-667-9
ISSN
2352-5428
DOI
10.2991/ssmi-18.2019.42How to use a DOI?
Copyright
© 2019, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - CONF
AU  - Xiaoyuan Wang
PY  - 2019/02
DA  - 2019/02
TI  - A Long Run Risks Model with Rare Disaster: An Empirical Test in the American Consumption Data
BT  - Proceedings of the 2018 International Symposium on Social Science and Management Innovation (SSMI 2018)
PB  - Atlantis Press
SP  - 237
EP  - 243
SN  - 2352-5428
UR  - https://doi.org/10.2991/ssmi-18.2019.42
DO  - 10.2991/ssmi-18.2019.42
ID  - Wang2019/02
ER  -