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C-CAPM without Ex Post Data

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  • Söderlind, Paul

    ()
    (University of St. Gallen)

Abstract

Survey and option data are used to take a new 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 (CBOE's VIX) indicates that investors overestimate the volatility of equity returns. Both facts reduce 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

Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 39.

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Length: 16 pages
Date of creation: 15 Dec 2005
Date of revision:
Handle: RePEc:hhs:sifrwp:0039

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Keywords: Equity premium puzzle; Livingston survey; CBOE VIX; Survey of professional forecasters;

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  1. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
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Cited by:
  1. Nir Jaimovich & Sergio Rebelo, 2006. "Behavioral Theories of the Business Cycle," Discussion Papers 07-015, Stanford Institute for Economic Policy Research.

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