Equity Risk Premium and Insecure Property Right
- Author(s): Magin, Konstantin
- et al.
How much of the equity risk premium puzzle can be attributed to the insecure property rights of shareholders? This paper develops a version of the CCAPM with insecure property rights (stochastic taxes). The model implies that the current expected equity premium can be reconciled with a coefficient of relative risk aversion of3:76, thus resolving the equity premium puzzle.