Abstract:Our paper investigates whether there is evidence of an Equity Premium Puzzle (EPP) in Brazil, applying two different methodologies. The EPP was identified by Mehra and Prescott (1985) since the Consumption Capital Asset Pricing Model (CCAPM), when calibrated with reasonable preference parameters, could not explain high historical average risk premiums in the United States. In our first approach, we consider Mehra's (2003) model and calibrate the coefficient of risk aversion, using 1995:2-2012:1 quarterly data.… Show more
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