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The Equity Risk Premium Puzzle
[Hádanka akciové rizikové prémie]

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  • Petr Musílek

Abstract

This paper discusses the issue of the equity risk premium puzzle, launched by the article by Marik a Marikova (2019a, 2019b). The introductory part of the article focuses on the essential conclusions from the above article. Furthermore, the paper pays attention to deepening the interpretation of the CAPM model. The following part of the paper discusses the limitation of the approach, which is based on the implied risk premium. The final part of the paper analyzes the alternative methods of determining the equity risk premium.

Suggested Citation

  • Petr Musílek, 2020. "The Equity Risk Premium Puzzle [Hádanka akciové rizikové prémie]," Oceňování, Prague University of Economics and Business, vol. 13(1-2), pages 65-79.
    • Handle: RePEc:prg:jnloce:v:13:y:2020:i:1-2:id:2020_1_05:p:65-79
    DOI: 10.18267/j.ocenovani.247
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    References listed on IDEAS

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    1. Pastor, Lubos & Stambaugh, Robert F., 2003. "Liquidity Risk and Expected Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 642-685, June.
    2. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
    3. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
    4. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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