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Discounting The Equity Premium Puzzle

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  • Vance Martin
  • G.C. Lim
  • Esfandiar Maasoumi

Abstract

This paper applies recent tests of stochastic dominance of several orders proposed by Linton, Maasoumi and Whang (2003) to reexamine the equity premium puzzle. An advantage of this nonparametric framework is that it provides a means to assess whether the existence of a premium is due to an incorrect choice of either the utility function or the underlying returns distribution. The approach is applied to a range of data sets including the S&P500

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File URL: http://repec.org/esAUSM04/up.2531.1078895389.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 331.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:ausm04:331

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Keywords: Equity premium puzzle; stochastic dominance; nonparametric; subsampling.;

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References

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Cited by:
  1. Milunovich, George & Thorp, Susan, 2006. "Valuing volatility spillovers," Global Finance Journal, Elsevier, vol. 17(1), pages 1-22, September.

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