%0 Journal Article %1 Weil:JME:1989 %A Weil, Philippe %D 1989 %J Journal of Monetary Economics %K equity-premium ezw puzzle risk-free-rate %N 3 %P 401-421 %R http://dx.doi.org/10.1016/0304-3932(89)90028-7 %T The Equity Premium Puzzle and the Risk-Free Rate Puzzle %U http://www.sciencedirect.com/science/article/pii/0304393289900287 %V 24 %X This paper studies the implications for general equilibrium asset pricing of a class of Kreps-Porteus nonexpected utility preferences characterized by a constant intertemporal elasticity of substitution and a constant, but unrelated, coefficient of relative risk aversion. It is shown that relaxing the parametric restriction on tastes imposed by the time-additive expected utility specification does not suffice to solve the Mehra-Prescott (1985) equity premium puzzle. An additional puzzle — the risk-free rate puzzle — emerges instead: why is the risk-free rate so low if agents are so averse to intertemporal substitution?

@article{Weil:JME:1989, abstract = {This paper studies the implications for general equilibrium asset pricing of a class of Kreps-Porteus nonexpected utility preferences characterized by a constant intertemporal elasticity of substitution and a constant, but unrelated, coefficient of relative risk aversion. It is shown that relaxing the parametric restriction on tastes imposed by the time-additive expected utility specification does not suffice to solve the Mehra-Prescott (1985) equity premium puzzle. An additional puzzle — the risk-free rate puzzle — emerges instead: why is the risk-free rate so low if agents are so averse to intertemporal substitution? }, added-at = {2014-10-12T19:27:40.000+0200}, author = {Weil, Philippe}, biburl = {https://www.bibsonomy.org/bibtex/289c229d9804dd6186356e46075359315/fcqms}, description = {The equity premium puzzle and the risk-free rate puzzle}, doi = {http://dx.doi.org/10.1016/0304-3932(89)90028-7}, interhash = {1ad73612405619400d7cda2f201e4a11}, intrahash = {89c229d9804dd6186356e46075359315}, issn = {0304-3932}, journal = {Journal of Monetary Economics }, keywords = {equity-premium ezw puzzle risk-free-rate}, number = 3, pages = {401-421}, timestamp = {2014-10-21T05:21:10.000+0200}, title = {The Equity Premium Puzzle and the Risk-Free Rate Puzzle }, url = {http://www.sciencedirect.com/science/article/pii/0304393289900287}, volume = 24, year = 1989 }