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Empirical Evidence for the New Definitions in Financial Markets and Equity Premium Puzzle

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  • Atilla Aras

Abstract

This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US financial markets from 1889-1978 are analyzed and the results indicate that equity investors who invested in the composite S&P 500 index were risk-averse in 1977. Conversely, risk-free asset investors who invested in US Treasury bills were found to exhibit not enough risk-loving behavior, which can be considered a type of risk-averse behavior. These findings suggest that the new definitions in financial markets accurately reflect the behavior of investors and should be considered in investment strategies.

Suggested Citation

  • Atilla Aras, 2023. "Empirical Evidence for the New Definitions in Financial Markets and Equity Premium Puzzle," Papers 2305.03468, arXiv.org, revised May 2024.
    • Handle: RePEc:arx:papers:2305.03468
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    References listed on IDEAS

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    4. Szpiro, George G, 1986. "Measuring Risk Aversion: An Alternative Approach," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 156-159, February.
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