Anomalies: The Equity Premium Puzzle
Abstract
The equity premium is the difference in returns between equities and fixed income securities, such as Treasury bills. The puzzle refers to the fact that the premium has historically been very large--about 6 percent per year--too large to be easily explained by risk aversion. The authors document the evidence for the puzzle and find that is exists in many countries, over long time periods, and does not seem to be explained by survivorship bias. They also summarize several theoretical explanations. The authors conclude that it is difficult to explain the equity premium without incorporating some kind of irrationality. Copyright 1997 by American Economic Association.Download Info
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Bibliographic Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 11 (1997)
Issue (Month): 1 (Winter)
Pages: 191-200
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Handle: RePEc:aea:jecper:v:11:y:1997:i:1:p:191-200
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
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