theoretical model for a shadow riskless rate (SRR) for such a market, based on the drift component of the state-price deflator for …

behavior of short-term riskless rate and models the risk free rate as a nonlinear trend stationary process. While addressing … increases overtime and then begin to decline at a very long horizon period; (3) the short-term riskless rate displays a …

pessimists and such a distribution leads automatically to a decrease in the riskless rate and to an increase of the risk premium …

than their underlying fundamentals? (ii) The equity premium puzzle: why under REE the predicted riskless rate is so high … conditions on beliefs which will ensure that the average riskless rate is low and hence the average equity risk premium is high … riskless bill. This tends to bid up the price of the bill and lowers the price of the stock resulting in a lower riskless rate …

-sectional relationship to a zero risk level, and thus to determine the implied instantaneous riskless rate of interest. We apply this …

? (ii) The equity premium puzzle: why under REE the predicted riskless rate is so high and the equity risk premium so low … the average riskless rate is low and the average equity risk premium is high. It turns out that the only circumstances … when the mean riskless rate falls to around 1% and the mean equity premium rises to around 5.5% arise when, on the average …