Preferences, Consumption Smoothing, and Risk Premia
Posted: 10 Feb 1998
Date Written: 1997
Abstract
Risk premia in the consumption capital asset pricing model depend on preferences and dividends. We develop a decomposition which allows for the separate treatment of both components. We show that preferences alone determine the risk-return trade-off measured by the Sharpe-ratio.
JEL Classification: E21, E44, G12
Suggested Citation: Suggested Citation
Uhlig, Harald and Lettau, Martin, Preferences, Consumption Smoothing, and Risk Premia (1997). Available at SSRN: https://ssrn.com/abstract=58453
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