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The Equity Premium Puzzle: Australia and the United States in Comparative Perspective

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Author Info
Ville, Simon () (University of Wollongong)
Abstract

The equity risk premium puzzle has received regular attention by economists since it was first invoked by Mehra and Prescott (1985) twenty years ago. In a recent paper, they revisit the question and reject many of the explanations offered but we are left with no clear alternative account. The current paper seeks to do two things. We provide matching historical evidence of the equity premium for Australia and compare the results for the two nations. Resulting from this, we argue that a closer understanding of phases of economic history helps to explain the puzzle.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012238.pdf
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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp06-25.

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Length: 11 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:uow:depec1:wp06-25

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-5351
Fax: +612 4221-3725
Web page: http://www.uow.edu.au/commerce/econ/
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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
N2 - Economic History - - Financial Markets and Institutions

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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. [Downloadable!] (restricted)
  2. Rajnish Mehra & Edward C. Prescott, 2003. "The Equity Premium in Retrospect," NBER Working Papers 9525, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Grossman, Sanford J & Shiller, Robert J, 1981. "The Determinants of the Variability of Stock Market Prices," American Economic Review, American Economic Association, vol. 71(2), pages 222-27, May. [Downloadable!] (restricted)
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  4. Narayana R. Kocherlakota, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March. [Downloadable!] (restricted)
    Other versions:
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