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C-CAPM without Ex Post Data

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  • Söderlind, Paul

    () (University of St. Gallen)

Abstract

Survey and option data are used to take a new 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 (CBOE's VIX) indicates that investors 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.

Suggested Citation

  • Söderlind, Paul, 2005. "C-CAPM without Ex Post Data," SIFR Research Report Series 39, Institute for Financial Research.
  • Handle: RePEc:hhs:sifrwp:0039
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    References listed on IDEAS

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    Cited by:

    1. Nir Jaimovich & Sergio Rebelo, 2007. "Behavioral Theories of the Business Cycle," Journal of the European Economic Association, MIT Press, pages 361-368.

    More about this item

    Keywords

    Equity premium puzzle; Livingston survey; CBOE VIX; Survey of professional forecasters;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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