The equity premium: Why is it a puzzle?

Research output: Contribution to journalArticle

75 Scopus citations

Abstract

This article takes a critical look at the equity premium puzzle - the inability of standard intertemporal economic models to rationalize the statistics that have characterized U.S. financial markets over the past century. A summary of historical returns for the United States and other industrialized countries and an overview of the economic construct itself are provided. The intuition behind the discrepancy between model prediction and empirical data is explained. After detailing the research efforts to enhance the model's ability to replicate the empirical data, I argue that the proposed resolutions fail along crucial dimensions.

Original languageEnglish (US)
Pages (from-to)54-69
Number of pages16
JournalFinancial Analysts Journal
Volume59
Issue number1
DOIs
StatePublished - Jan 1 2003
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The equity premium: Why is it a puzzle?'. Together they form a unique fingerprint.

  • Cite this