The Global Equity Premium Revisited: What Human Rights Imply for Assets' Purchasing Power

39 Pages Posted: 12 Oct 2018

See all articles by Jedrzej Pawel Bialkowski

Jedrzej Pawel Bialkowski

University of Canterbury - Department of Economics and Finance

Ehud I. Ronn

University of Texas at Austin - Department of Finance

Date Written: June 29, 2018

Abstract

In this paper, we argue that past computations of the equity risk premium did not properly account for the financial implications of political collapse on property, civil and human rights. Accordingly, we argue past calculations overstated the equity risk premium. In their stead, we argue a conservative lower bound is to set the value of equity to zero when confronted with the total absence of human, civil and property rights which negate the purchasing power of financial investments. In doing so, we provide a valid lower-bound estimate of the equity risk premium that is corrected for lack of such basic rights, demonstrating the important changes in this estimate over time.

Keywords: Rare (Black Swan) Events; Equity Premium; International Political Crises; Property, Civil and Human Rights; World War II; World Equity Index

JEL Classification: G12, G15

Suggested Citation

Bialkowski, Jedrzej Pawel and Ronn, Ehud I., The Global Equity Premium Revisited: What Human Rights Imply for Assets' Purchasing Power (June 29, 2018). Available at SSRN: https://ssrn.com/abstract=3253734 or http://dx.doi.org/10.2139/ssrn.3253734

Jedrzej Pawel Bialkowski (Contact Author)

University of Canterbury - Department of Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Ehud I. Ronn

University of Texas at Austin - Department of Finance ( email )

Graduate School of Business
Austin, TX 78712
United States
512-471-5853 (Phone)
512-471-5073 (Fax)

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