C-CAPM without Ex Post Data
AbstractSurvey 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 perhaps 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 InfoPaper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2006 with number 2006-22.
Length: 22 pages
Date of creation: Sep 2006
Date of revision:
equity premium puzzle; Livingston survey; S&P 500 options; Survey of Professional Forecasters;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-14 (All new papers)
- NEP-FIN-2006-10-14 (Finance)
- NEP-FMK-2006-10-14 (Financial Markets)
- NEP-MAC-2006-10-14 (Macroeconomics)
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