IDEAS home Printed from https://ideas.repec.org/a/icf/icfjaf/v18y2012i2p19-36.html
   My bibliography  Save this article

Equity Premium Puzzle, Prospect Theory and Subprime Crisis

Author

Listed:
  • Mouna Abdelhédi-Zouch
  • Mouna Boujelbène Abbes
  • Younès Boujelbène

Abstract

The equity premium puzzle is one of the most important phenomena in finance. Related to behavioral finance, we use the concept of Myopic Loss Aversion (MLA) to explain the puzzle in developed and emerging markets. Empirically, we support the robustness of the positive equity premium across the most developed and emerging markets before the subprime crisis. However, the equity premium becomes negative during the subprime crisis, except for the financial markets of Hong Kong, India and Tunisia. Using a simulation method, we find that myopic emerging and developed market investors evaluate their portfolios annually. Furthermore, the optimal stocks allocation by myopic loss-averse investors is higher in emerging markets than in the developed markets.

Suggested Citation

  • Mouna Abdelhédi-Zouch & Mouna Boujelbène Abbes & Younès Boujelbène, 2012. "Equity Premium Puzzle, Prospect Theory and Subprime Crisis," The IUP Journal of Applied Finance, IUP Publications, vol. 18(2), pages 19-36, April.
    • Handle: RePEc:icf:icfjaf:v:18:y:2012:i:2:p:19-36
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Chun & He, Fangyi & Lin, Lei, 2024. "Anchoring effect, prospect value and stock return," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1539-1556.
    2. Mouna Abdelhédi-Zouch & Mouna Boujelbène Abbes & Younès Boujelbène, 2015. "Volatility Spillover And Investor Sentiment: Subprime Crisis," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 83-101.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjaf:v:18:y:2012:i:2:p:19-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: G R K Murty (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.