The idea of representing choice under uncertainty as a trade-off between mean returns and some measure of risk or uncertainty is fundamental to the analysis of investment decisions. In this paper, we show that preferences can be characterized in this way, even in the absence of objective...

Excessive volatility of asset prices like that generated in the 'noise trader'' model of De Long et al. is one factor that plausibly might contribute to an explanation of the equity premium. We extend the De Long et al. model to allow for privatization of publicly-owned assets and assess the...

Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the...

Analysis of the equity premium puzzle has focused on private--sector capital markets. However, the existence of an anomalous equity premium raises important issues in the evaluation of public--sector investment projects. These issues are explored below. We begin by formalizing the argument that...

Excessive volatility of asset prices like that generated in the 'noise trader' model of De Long et al. is one factor that plausibly might contribute to an explanation of the equity premium. We extend the De Long et al. model to allow for privatization of publicly-owned assets and assess the...

Simon Grant and John Quiggin argue that taking the equity premium seriously---the well-known fact that the average annual historical return of stocks is seven times that of government bonds and other debt---has many implications, the most robust of which is that recessions are extremely costly...

Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the...

Although the Cournot and Bertrand equilibrium concepts have dominated economic analysis of oligopoly problems, neither has a compelling theoretical rationale. However, notions of capacity commitment have been used to rationalize the Cournot equilibrium. At the same time, the idea of competition...