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Shiba Suzuki
''Risks after disasters: a note on the effects of precautionary saving on equity premiums''
( 2009, Vol. 29 No.1 )
This paper studies the effects on equity premiums of grisks after disastersh, which are defined as a sharp rise in volatility of real per capita GDP growth rates immediately following disasters. This paper makes three contributions. First, we analytically demonstrate that if and only if the degree of relative prudence is higher than 2, risks after disasters decrease equity premiums. Second, we find that the differences between equity premiums with and without risks after disasters are quantitatively significant. Third, equity premiums are still higher in the case of disaster than without a disaster.
E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
Manuscript Received : Nov 04 2008 Manuscript Accepted : Mar 13 2009

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