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The C-CAPM without ex post data

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  • Söderlind, Paul

Abstract

Survey and option data are used to take a fresh look at the equity premium puzzle. Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data suggests that investors tend to overestimate the volatility of equity returns. Both facts contribute towards solving the puzzle. However, data on beliefs about output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is somewhat less of a puzzle than in ex post data.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 4 (December)
Pages: 721-729

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:4:p:721-729

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Equity premium puzzle Livingston survey S& P 500 options Survey of Professional Forecasters;

References

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  12. Paul Söderlind, 2008. "Why Disagreement May Not Matter (much) for Asset Prices," University of St. Gallen Department of Economics working paper series 2008 2008-11, Department of Economics, University of St. Gallen.
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  18. Brown, Stephen J & Goetzmann, William N & Ross, Stephen A, 1995. " Survival," Journal of Finance, American Finance Association, vol. 50(3), pages 853-73, July.
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Cited by:
  1. De Graeve, Ferre & Dossche, Maarten & Emiris, Marina & Sneessens, Henri & Wouters, Raf, 2010. "Risk Premiums and Macroeconomic Dynamics in a Heterogeneous Agent Model," Working Paper Series 236, Sveriges Riksbank (Central Bank of Sweden).

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