Is low international risk sharing consistent with a high equity premium? A reconciliation of two puzzles [An article from: Economics Letters]

This digital document is a journal article from Economics Letters, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
In an incomplete market setting, we show that a pricing kernel exists, which reconciles the observed smooth real exchange rates with high domestic equity premium and low international risk sharing. The estimation results based on the US-Japanese data provide plausible estimates of the deep parameters.