In a representative agent model with time-separable CRRA preferences, under the assumption of log-normal and homoskedastic: Financial Economics Assignment, UCD, Ireland
| University | University College Dublin (UCD) |
| Subject | Financial Economics |
In a representative agent model with time-separable CRRA preferences, under the assumption of log-normal and homoskedastic consumption and equity returns, the equity risk premium can be written as:
where 
is log (gross) real equity return, 
is log (gross) real risk-free return, 𝛾 is the relative risk aversion parameter, Δ𝑐 is real per capita consumption growth and 
is the variance of real risky log returns?
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