Democratization, Inequality, and Risk Premia

81 Pages Posted: 15 Jan 2020 Last revised: 7 Jun 2021

See all articles by Max Miller

Max Miller

University of Pennsylvania, The Wharton School, Finance Department

Date Written: May 24, 2021


Risk premia are significantly elevated during periods of democratization in a cross-country panel of equity data covering 85 countries over 200 years, despite little effect on GDP or dividends. This result is explained in an asset pricing model in which wealthy asset market participants face redistribution if democracy consolidates. Finally, in a quasi-natural experiment emanating from a shift in Catholic church doctrine in support of democracy, majority Catholic autocracies display significantly higher average excess returns relative to other countries in a difference-in-differences framework. These results are key to understanding how the redistribution of economic and political power influence financial decisions.

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 (May 24, 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

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