Democratization, Inequality, and Risk Premia

79 Pages Posted: 15 Jan 2020 Last revised: 18 Mar 2021

See all articles by Max Miller

Max Miller

University of Pennsylvania, The Wharton School, Finance Department

Date Written: March 15, 2021


Periods of democratization exhibit economically large spikes in risk premia. In a panel data set covering 85 countries over 200 years, several proxies for risk premia are significantly elevated during periods of democratization, despite little to no effect on aggregate consumption and dividends. This result is explained in an asset pricing model in which wealthy asset market participants must redistribute their income if democracy consolidates. Finally, in a quasi-natural experiment emanating from a shift in Catholic church doctrine in support of democracy in 1963, average returns were significantly higher for majority Catholic autocracies relative to control countries in a triple difference-in-differences framework. These results are key to understanding how political institutions and the distribution of economic and political power influence asset returns.

Keywords: Risk Premia, Democratization, Inequality, Political Institutions, Catholic Church

JEL Classification: G10, G15, G18, N40, P16

Suggested Citation

Miller, Max, Democratization, Inequality, and Risk Premia (March 15, 2021). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: or

Max Miller (Contact Author)

University of Pennsylvania, The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics