Inflation risk and default risk in a dynamic general equilibrium asset pricing model for an emerging market economy

Date

2002

Editor(s)

Advisor

Başçı, Erdem

Supervisor

Co-Advisor

Co-Supervisor

Instructor

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Abstract

In this thesis, the difference between the T-Bill returns and common stock returns in Turkey is examined. It is observed that there is a bond premium in Turkey unlike the equity premium observed in developed countries. To understand this surprising observation, inflation-risk and default-risk are incorporated to the Mehra-Presscott (1985) dynamic asset pricing model. Inflation-risk alone is found to be insufficient to explain this bond premium. Only after allowing for a perceived default-risk, the observed bond premium of Turkish T-Bills over Turkish common stocks can be explained by such a model.

Source Title

Publisher

Course

Other identifiers

Book Title

Keywords

Equity Premium Puzzle, Default Risk, Inflation Risk, Asset Pricing, Bond Premium

Degree Discipline

Economics

Degree Level

Master's

Degree Name

MA (Master of Arts)

Citation

Published Version (Please cite this version)

Language

English

Type