Long Run Risk Model and Equity Premium Puzzle in Thailand
Keywords:equity premium puzzle, long-run risk model, long-run component risk, asset pricing, generalized method of moments
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.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
The submission of a manuscript implies that the paper is an original work and has not been published elsewhere. The author(s) authorize the journal to reproduce or distribute the paper in printed or other electronic forms.