The Equity Premium Puzzle: Australia and the United States in Comparative Perspective
The equity risk premium puzzle has received regular attention by economists since it was first invoked by Mehra and Prescott (1985) twenty years ago. In a recent paper, they revisit the question and reject many of the explanations offered but we are left with no clear alternative account. The current paper seeks to do two things. We provide matching historical evidence of the equity premium for Australia and compare the results for the two nations. Resulting from this, we argue that a closer understanding of phases of economic history helps to explain the puzzle.
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- Mehra, Rajnish & Prescott, Edward C., 2003.
"The equity premium in retrospect,"
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 14, pages 889-938
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Rodney L. White Center for Financial Research Working Papers
18-80, Wharton School Rodney L. White Center for Financial Research.
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- Kocherlakota, N., 1995.
"The Equity Premium: It's Still a Puzzle,"
95-05, University of Iowa, Department of Economics.
- Narayana R. Kocherlakota, 1995. "The equity premium: it's still a puzzle," Discussion Paper / Institute for Empirical Macroeconomics 102, Federal Reserve Bank of Minneapolis.
- R. Mehra & E. Prescott, 2010.
"The equity premium: a puzzle,"
Levine's Working Paper Archive
1401, David K. Levine.
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