Handbook of the Equity Risk Premium

CHAPTER 2 Risk-Based Explanations of the Equity Premium

John Donaldson

Columbia University

Rajnish Mehra

University of California, Santa Barbara, and NBER

Introduction

1. Alternative Preference Structures

1.1. Preliminaries

1.2. Coincidence of Risk and Time Preferences in CRRA utility

1.3. Separating Risk and Time Preferences: Epstein–Zin and others

1.4. Variation in the CRRA and EIS

1.5. Habit Formation

1.6. Behavioral Models

1.7. Beyond One Good and a Representative Agent

2. Production Economies

3. Disaster Events and Survivorship Bias

4. Market Incompleteness and Trading Frictions

4.1. Restricted Participation

5. Model Uncertainty

6. Concluding Comments

References

Abstract This essay reviews the family of models that seek to provide ...