Long Run Risk Model and Equity Premium Puzzle in Thailand

Authors

  • Sartja Duangchaiyoosook Research Institute for Policy Evaluation and Design University of the Thai Chamber of Commerce, Bangkok, Thailand
  • Weerachart T. Kilenthong Research Institute for Policy Evaluation and Design University of the Thai Chamber of Commerce, Bangkok, Thailand

Keywords:

equity premium puzzle, long-run risk model, long-run component risk, asset pricing, generalized method of moments

Abstract

This paper shows that the long-run risk model of Bansal and Yaron (2004) can potentially solve the equity premium and risk-free rate puzzles in Thailand. In particular, the calibrated values of the risk aversion and the elasticity of intertemporal substitution are empirically plausible. Risk decomposition results indicate that both short-run and long-run risks are equally important risk components relevant to asset prices in Thai financial markets while news regarding economic uncertainty, represented by volatility risk, have only an inconsequential impact.

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Published

2022-03-31

How to Cite

Duangchaiyoosook, S., & Kilenthong, W. T. (2022). Long Run Risk Model and Equity Premium Puzzle in Thailand. SOUTHEAST ASIAN JOURNAL OF ECONOMICS, 10(1), 133–167. Retrieved from https://so05.tci-thaijo.org/index.php/saje/article/view/258338

Issue

Vol. 10 No. 1 (2022): Southeast Asian Journal of Economics, Vol.10 No.1 (April 2022)

Section

Original Articles

License

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