Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Equity Premium Puzzle New Zealand Evidence

The Equity Premium Puzzle New Zealand Evidence This paper examines the implications of standard barter models of market equilibrium for financial security returns in New Zealand. The key question addressed is does the equity premium puzzle of Mehra and Prescott 1985 found in the U.S. also hold in ew Zealand To examine the existence of the equity premium puzzle, quarterly financial security returns and consumption data are examined from 1965 to 1997 to calibrate parameters in the Consumption Based Asset Pricing Model. Unlike much of the existing international evidence, this paper corrects for durable goods consumption following the assumptions of the model that all consumption be consumed in a given period. Numerical analyses indicate that the class of models examined are unable to generate equity premia consistent with historical estimates of the equity premium in New Zealand. Due to small sample variability however, while this discrepancy is material in size, the result is not statistically significant. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

The Equity Premium Puzzle New Zealand Evidence

Pacific Accounting Review , Volume 12 (2): 35 – Feb 1, 2000

Loading next page...
 
/lp/emerald-publishing/the-equity-premium-puzzle-new-zealand-evidence-kiguM16WUg
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0114-0582
DOI
10.1108/eb037953
Publisher site
See Article on Publisher Site

Abstract

This paper examines the implications of standard barter models of market equilibrium for financial security returns in New Zealand. The key question addressed is does the equity premium puzzle of Mehra and Prescott 1985 found in the U.S. also hold in ew Zealand To examine the existence of the equity premium puzzle, quarterly financial security returns and consumption data are examined from 1965 to 1997 to calibrate parameters in the Consumption Based Asset Pricing Model. Unlike much of the existing international evidence, this paper corrects for durable goods consumption following the assumptions of the model that all consumption be consumed in a given period. Numerical analyses indicate that the class of models examined are unable to generate equity premia consistent with historical estimates of the equity premium in New Zealand. Due to small sample variability however, while this discrepancy is material in size, the result is not statistically significant.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Feb 1, 2000

There are no references for this article.