The interaction between the equity premium and the risk-free rate

The equity premium arises from the interaction between the atemporal risk premium for equity, the risk-free rate of intertemporal substitution and the impact of risk on the precautionary motive for saving. Depending on parameter values, the equity premium may either be increased or reduced by the presence of undiversifiable background risk. (C) 2000 Elsevier Science S.A. All rights reserved.

Marital status and the division of household labour: Cohabitation vs marriage

Examining housework patterns in cohabiting and married couples and the impact of the experience of cohabitation on subsequent domestic labour patterns within marriage - women do a much larger proportion of child care and routine indoor housework tasks than men, regardless of marital status - the gender division of labour between cohabiting partners is less traditional for women with less time spent on domestic labour than married women.

Public investment and the risk premium for equity

Analysis of the equity premium puzzle has focused on private-sector capital markets. However, the existence of an anomalous equity premium raises important issues in the evaluation of public-sector investment projects. These issues are explored below. We begin by formalizing the argument that an equity premium may arise from uninsurable systematic risk in labour income, and show that, other things being equal, increases in public ownership of equity will improve welfare, up to the point where the equity premium is eliminated. Finally, we consider policy implications and the optimal extent of public ownership.

Marriage breakdown in Australia - The social correlates of separation and divorce

Marriage breakdown through separation and divorce is a pervasive feature of Australian society. But little research investigates the social factors associated with marital breakdown in Australia. This study builds on and extends Australian research by using survival analysis models to examine patterns of association among temporal, life-course, attitudinal and economic factors associated with marital breakdown. Using data from the Household Income and Labour Dynamics in Australia (HILDA) survey, we find marital breakdown in Australia is socially patterned in similar ways to other Western countries. But our findings point to several directions for future research into marriage breakdown in Australia, and we identify certain unique features of Australian marriage breakdown that warrant a more detailed investigation, such as the relationship between ethnic origin and the risk of marital breakdown.

Relationship between franking credits and the market risk premium

In a dividend imputation tax system, equity investors have three potential sources of return: dividends, capital gains and franking (tax) credits. However, the standard procedures for estimating the market risk premium (MRP) for use in the capital asset pricing model, ignore the value of franking credits. Officer (1994) notes that if franking credits do affect the corporate cost of capital, their value must be added to the standard estimates of MRP. In the present paper, we explicitly derive the relationship between the value of franking credits (gamma) and the MRP. We show that the standard parameter estimates that have been adopted in practice (especially by Australian regulators) violate this deterministic mathematical relationship. We also show how information on dividend yields and effective tax rates bounds the values that can be reasonably used for gamma and the MRP. We make recommendations for how estimates of the MRP should be adjusted to reflect the value of franking credits in an internally consistent manner.

Family, work and health - The impact of marriage, parenthood and employment on self-reported health of Australian men and women

We investigate multiple-burden and multiple-attachment hypotheses for the association among marriage, parenthood, employment and health for Australian men and women. Using longitudinal data from the Australian panel survey, 'Negotiating the Lifecourse', we find that men and women employed full time report better health than those employed part time or not employed. Previously married women report worse health than married women, but there is no association between marital status and health for men. We also find that men with preschool children in the household report worse health than men with older children, whereas women with preschool children report better health than women with older children. In addition for women we find evidence of a role-burden where combining full-time employment and children has a negative impact on health, but combining children with part-time or no employment has a beneficial health effect. There are no health effects of combining roles for men.

The risk premium for equity: implications for resource allocation, welfare and policy

Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the first-best outcome implied by a given explanation of the equity premium puzzle, the more interventionist are the implied policy conclusions. Nevertheless, even explanations of the equity premium puzzle consistent with a general consumption-based asset pricing model have important welfare and policy implications.