NO.PZ2023040601000085
问题如下：
Risk-averse investors demanding a large equity risk premium are most likely expecting their future consumption outcomes and equity returns to be:
选项：
A.uncorrelated.
positively correlated.
negatively correlated.
解释：
If investors demand high equity risk premiums, they are likely expecting their future consumption and equity returns to be positively correlated. The positive correlation indicates that equities will exhibit poor hedging properties, as equity returns will be high (e.g., pay off) during “good times” and will be low (e.g., not pay off) during “bad times”. In other words, the covariance between risk-averse investors’ inter-temporal rates of substitution and the expected future prices of equities is highly negative, resulting in a positive and large equity risk premium. This is the case because, in good times, when equity returns are high, the marginal value of consumption is low. Similarly, in bad times, when equity returns are low, the marginal value of consumption is high. Holding all else constant, the larger the magnitude of the negative covariance term, the larger the risk premium.
what does future consumption outcome mean? does this mean benefit of consuming in the future compared to now.
so a higher equity return would mean consume now, so isn't that inverse relationship.
and what is the relationship between "future consumption outcome" and subsitution rate?
