Inflation risk and default risk in a dynamic general equilibrium asset pricing model for an emerging market economy
Date
2002
Authors
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
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Published Version (Please cite this version)
Language
English