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The impacts of rare disasters on asset returns and risk premiums in advanced economies (1870–2015)

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  • NguyenHuu, Tam

Abstract

This paper analyses the impacts of rare disasters (financial, geopolitical and natural-technological) on the returns and risk premiums of stock and housing in 17 advanced economies for the period of 1870 to 2015. The stock return is sensitive only to the financial risk but not to the geopolitical and natural-technological ones. The housing return sees moderate impacts of financial and geopolitical disasters, but negligible impacts of natural-technological ones. The rare disasters can explain the surprisingly high risk premium (so-called ”risk premium puzzle”) of stock but not of housing.

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  • NguyenHuu, Tam, 2022. "The impacts of rare disasters on asset returns and risk premiums in advanced economies (1870–2015)," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321001999
    DOI: 10.1016/j.frl.2021.102118
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    More about this item

    Keywords

    Housing return; Stock return; Risk premium puzzle; Financial crises; Geopolitical risks; Natural and technological catastrophes;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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