Abstract

https://ssrn.com/abstract=338833
 
 

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The Equity Premium and the Concentration of Aggregate Shocks


N. Gregory Mankiw


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

1986

NBER Working Paper No. w1788

Abstract:     
This paper examines an economy in which aggregate shocks are not dispersed equally throughout the population. Instead, while these shocks affect all individuals ex ante, they are concentrated among a few ex post.The equity premium in general depends on the concentration of these aggregate shocks; it follows that one cannot estimate the degree of risk aversion from aggregate data alone. These findings suggest that the empirical usefulness of aggregation theorems for capital asset pricing models is limited.

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Date posted: July 8, 2004  

Suggested Citation

Mankiw, N. Gregory, The Equity Premium and the Concentration of Aggregate Shocks (1986). NBER Working Paper No. w1788. Available at SSRN: https://ssrn.com/abstract=338833

Contact Information

N. Gregory Mankiw (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Room 223
Cambridge, MA 02138
United States
617-495-4301 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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