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dc.contributor.authorAase, Knut K.
dc.date.accessioned2006-07-13T07:28:12Z
dc.date.available2006-07-13T07:28:12Z
dc.date.issued2004-06
dc.identifier.issn1500-4066
dc.identifier.urihttp://hdl.handle.net/11250/164035
dc.description.abstractThe paper develops a consumption based equilibrium model, focusing on the risk premium and the risk-free interest rate. We derive testable expressions for these quantities, and confront these with sample estimates for the 20. century. Our framework is a dynamic model in continuous time, allowing for random jumps at random time points, in addition to diffusion uncertainty. Preferences are time separable and additive. The classical equity premium puzzle and the risk-free rate puzzle are re-examined. We present values for the parameters of the representative agent's utility function for different values of risk premia and interest rates, calibrated to two first moments of the US-data of the last century. Relatively low values for agents' risk aversion are consistent with the model, but positive values of the subjective interest rate seem harder to fit.en
dc.format.extent442351 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoengen
dc.publisherNorwegian School of Economics and Business Administration. Department of Finance and Management Scienceen
dc.relation.ispartofseriesDiscussion paperen
dc.relation.ispartofseries2004:12en
dc.subjectconsumption based CAPMen
dc.subjectequilibrium interest rateen
dc.subjectthe equity premium puzzleen
dc.subjectthe risk-free rate puzzleen
dc.subjectjump/diffusionsen
dc.titleJump dynamics : the equity premium and the risk-free rate puzzlesen
dc.typeWorking paperen


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