|
| |
| | Equity premium puzzle - Wikipedia, the free encyclopedia |
 | | The equity premium puzzle refers to the phenomenon that observed average annual returns on stocks over the past century are higher, by approximately 6 percentage points, than returns on government bonds. | | | The evaluation time period implied in their model by an equity premium of 6 percentage points and a 2x loss aversion multiplier (a general finding of loss aversion research) is approximately one year. | | | The magnitude of the equity premium has implications for resource allocation, social welfare, and economic policy. |
|
http://en.wikipedia.org/wiki/Equity_premium_puzzle
(576 words)
|
|
| |
| | ECO 7206 - Advanced Macroeconomics for Ph.D. |
| | Mehra and Prescott (1985) The Equity Premium: A Puzzle. | | | Simon Grant and John Quiggin (2001) The Risk Premium for Equity: Explanations and Implications. | | | (2002) Junior Can't Borrow: A New Perspective on the Equity Premium Puzzle (with G.M. Constantinides and J.B. Donaldson): Quarterly Journal of Economics, 117, February, pp. |
|
http://www.bus.ucf.edu/omikhail/Eco7206/F2002/Eco-7205-f2002.htm
(1078 words)
|
|
| |
| | Watson Wyatt Worldwide Published Articles |
| | From 1889 to 2000, the equity premium in the US was on average 6.9%. | | | The equity premium is a crucial factor in pension fund investment. | | | The literature on the equity premium puzzle suggests that theoretical financial economics models have limited value in predicting the size of the equity premium. |
|
http://www.watsonwyatt.com/europe/news/articles/parender.asp?id=uk-026&page=1
(897 words)
|
|
| |
| | Equity Premium Puzzle |
| | Since regulators usually insist that fund performance data be presented in terms of compound annual returns, it may come as a surprise to many investors that the equity premium is stated in terms of an arithmetic mean, that is the sum of the annual returns divided by the number of years. | | | The equity premium in the US is usually taken to be about 6 - 7%/year for periods going back over 100 years from the present. | | | Table 1.8 Values of the mean and compound annual equity premiums for various periods. |
|
http://publish.uwo.ca/~jnuttall/equity.html
(2054 words)
|
|
| |
| | New Economist: Has Barro solved the equity premium puzzle? |
| | EQUITY PREMIUM CHATTER....Via Tyler Cowen, New Economist has an interesting roundup of reactions to a new paper by Robert Barro purporting to explain the equity premium puzzle. | | | We also show that, to the extent that the equity premium is due to various kinds of capital market failure, it provides a rationale for public ownership of some business enterprises and for a rate of return on public investment close to the real bond rate. | | | Mehra and Prescott showed it was difficult to reconcile empirical facts about equity and debt returns with reasonable assumptions about the relative rate of risk aversion and the pure rate of time preference, posing difficulties for the capital asset pricing model. |
|
http://neweconomist.blogs.com/new_economist/2005/09/new_research_on.html#more
(2365 words)
|
|
| |
| | Federal Reserve Bank of Minneapolis - The Region - The Vanishing Equity Premium (June 2001) |
| | For SandP stocks, for example, relative to long-term bonds, the average equity premium from 1926 to 1970 was 6.8 percentage points. | | | A recent survey of 226 such professors found their equity premium forecasts to be quite high: an average one-year horizon forecast of 5.8 percentage points and an average five-year forecast of 6.7 points. | | | The equity premium—the premium that investors receive for investing in stocks rather than bonds—appears to have decreased substantially in recent years, just as economic theory says it should |
|
http://woodrow.mpls.frb.fed.us/pubs/region/01-06/equity.cfm?js=0
(848 words)
|
|
| |
| | The Dead Parrot Society: The Equity Premium Puzzle |
| | The equity premium from 1889-2002 was about 6.11%. | | | The reduction in the assumed equity premium may have been motivated by persuasive criticism from people like Peter Diamond, who wrote in 2000 that the Social Security projections were inconsistent. | | | All in all, I remain perplexed by the equity premium puzzle, but it is important to note that its importance to the debate is limited. |
|
http://www.deadparrots.net/archives/social_security/0502the_equity_premium_puzzle.html
(1940 words)
|
|
| |
| | 4 Theoretical analysis – the equity premium puzzle - The Market Equity Risk Premium - Treasury Paper - The ... |
| | The problem, originally identified by Mehra and Prescott (1985) and termed the “equity premium puzzle” is that plausible values for the variables on the right side of the equation produce estimates of the equity risk premium of less than one percent. | | | It remains to be seen whether the drastic modifications and a high equity premium, or the standard model and a low equity premium, will triumph in the end. | | | The equity premium has also been examined from a theoretical perspective. |
|
http://www.treasury.govt.nz/merp/04.asp
(825 words)
|
|
| |
| | Stumbling and Mumbling: The equity premium puzzle |
| | It’s that the US’s equity premium is due to luck. | | | The prospective equity risk premium is a great topic- loads of historic data, and contributions from some of the brainiest people around, yet no real fix on whether the future is or isn’t going to be like the past. | | | The puzzle is that equities have done far better than they should over the long-run. |
|
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2005/02/the_equity_prem.html
(1124 words)
|
|
| |
| | Anomalies: The Equity Premium Puzzle |
| | The equity premium is the difference in returns between equities and fixed income securities, such as Treasury bills. | | | "Equity returns, bond returns, and the equity premium in the German capital market," European Journal of Finance, Taylor and Francis Journals, vol. | | | The authors conclude that it is difficult to explain the equity premium without incorporating some kind of irrationality. |
|
http://ideas.repec.org/a/aea/jecper/v11y1997i1p191-200.html
(943 words)
|
|
| |
| | Wilmott Forums - equity premium puzzle |
| | I am not equity derivatives expert but the futures contract appears to be priced on the basis of Libor swap minus the anticipated divident yield. | | | Also if you go to www.aimr.com and choose the Equity Risk Premium Forum in the middle of the page, there is a downloadable series of papers and discussions from people such as Martin Leibowitz and Jeremy Siegel and Bob Shiller from November of last year on this topic. | | | He refers to a recent study indicating that the equity premium has fallen since 1970. |
|
http://www.wilmott.com/messageview.cfm?catid=3&threadid=3236
(2382 words)
|
|
| |
| | S-WoPEc: Social Security and the Equity Premium Puzzle |
| | The efect on the equity premium is substantial. | | | Social security reduces the bond demand of the middle-aged, thereby restricting the possibilities of the young to finance their equity purchases. | | | Social security also increases the covariance between future consumption and the equity income of the young. |
|
http://swopec.hhs.se/iiessp/abs/iiessp0729.htm
(213 words)
|
|
| |
| | SSRN-On the Relation Between Credit Spread Puzzles and the Equity Premium Puzzle by Long Chen, Pierre Collin-Dufresne, ... |
| | We conclude that both the equity premium and the level as well as dynamics of credit spreads can be explained simultaneously by the same pricing kernels, with a time-varying equity premium as an essential component. | | | We ask whether the equity premium puzzle and the credit spread puzzle - both are found to be too high for the risk they entail - can be simultaneously explained by theoretical models. | | | However, such a feature can generate the counterfactual prediction that forward-looking default rates are pro-cyclical, since in such an economy low expected returns in good times implies a greater probability of reaching the default boundary. |
|
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=687473
(481 words)
|
|
| |
| | Wilmott Forums - Equity Risk Premium, dividend puzzle and duration |
| | The subject of equity valuation is indeed a hairy one, but, in my opinion, it (the long-term aspect of it, especially) is less complicated as it is made out to be. | | | Examining how markets value the range of future uncertain cash flows and investments implicit in equity value is one of the remaining mysteries of finance. | | | The investor, who prices the equity using dividends, MUST reach a conclusion similar to that of the firm's, which prices the same equity using the DCF of earnings. |
|
http://www.wilmott.com/messageview.cfm?catid=4&threadid=1953
(3182 words)
|
|
| |
| | Behavioral finance - KnowledgeIsFun.com |
| | Applying a version of prospect theory, Benartzi and Thaler (1995) claim to have solved the equity premium puzzle, something conventional finance models have been unable to do. | | | Shlomo Benartzi; Richard H. Thaler 'Myopic Loss Aversion and the Equity Premium Puzzle' (1995) The Quarterly Journal of Economics, Vol. | | | In reply, others contend that most personal investment funds are managed through superannuation funds, so the effect of these putative barriers to entry would be minimal. |
|
http://www.knowledgeisfun.com/B/Be/Behavioral-finance.php
(1626 words)
|
|
| |
| | EconPapers: Occupational Choice and the Private Equity Premium Puzzle |
| | In this setting, becoming an entrepreneur is equivalent to investing in non-traded private equity capital subject to transaction costs. | | | We model the return on private equity as the sum of two components, the individual ability of the entrepreneur and idiosyncratic business risk. | | | Occupational Choice and the Private Equity Premium Puzzle |
|
http://econpapers.repec.org/paper/ihsihsesp/122.htm
(271 words)
|
|
| |
| | The equity premium puzzle and decreasing relative risk aversion |
| | The equity premium puzzle and decreasing relative risk aversion | | | Roche, Maurice (2005) The equity premium puzzle and decreasing relative risk aversion. | | | Agents are assumed to have a power risk aversion utility function in an otherwise standard asset pricing model. |
|
http://eprints.may.ie/archive/00000207
(84 words)
|
|
| |
| | EconPapers: Discounting The Equity Premium Puzzle |
| | An advantage of this nonparametric framework is that it provides a means to assess whether the existence of a premium is due to an incorrect choice of either the utility function or the underlying returns distribution. | | | Keywords: Equity premium puzzle; stochastic dominance; nonparametric; subsampling. | | | Abstract: This paper applies recent tests of stochastic dominance of several orders proposed by Linton, Maasoumi and Whang (2003) to reexamine the equity premium puzzle. |
|
http://econpapers.repec.org/paper/ecmausm04/331.htm
(205 words)
|
|
| |
| | A Further Equity Premium Puzzle from Ohio State University White Papers at ZDNet UK |
| | These in turn dominate asset pricing, so that the equity premium on claims on all future output is indeed infinite. | | | When maturity-specific claims on real output are introduced, the equity premium is seen to increase without bound at the most distant horizons. | | | A Further Equity Premium Puzzle from Ohio State University White Papers at ZDNet UK Don't Miss: |
|
http://whitepapers.zdnet.co.uk/0,39025945,60017300p-39000666q,00.htm
(142 words)
|
|
| |
| | Untitled |
| | The authors are remarkably open minded, perhaps a sign of the evolution of finance in recent times-the result of the equity premium puzzle and the crack in the rationality hypothesis. | | | One can find included discussions of such adventurous topics as a neural network approach to option pricing and a mention of technical analysis that is, remarkably, not condescending. | | | This book, in addition to the econometric applications (where econometric issues become indistinguishable from pure theory), fills such gap. |
|
http://www.fooledbyrandomness.com/books.htm
(1482 words)
|
|
| |
| | Equity Premium Puzzle |
| | Siegel and Thaler have an excellent non-technical article in the Winter 1997 Journal of Economic Perspectives on the Equity Premium Puzzle. | | | Siegel and Thaler discuss various explanations as to why stocks have such a high rate of return, and finally turn their attention to my favorite explanation --- that many people are not behaving in an informed, rational manner in making their investment decisions. |
|
http://www.hec.ohio-state.edu/scf/eqpuzz.htm
(181 words)
|
|
| |
| | Hu McCulloch's Page |
| | The "Bellwether" 30-Year Treasury Bond is a Bad Investment | | | "The Inflation Premium Implicit in the U.S. Real and Nominal Term Structures of Interest Rates," |
|
http://www.econ.ohio-state.edu/jhm/jhm.html
(438 words)
|
|
| |
| | Professor David Laibson's Papers on the Web |
| | A Debt Puzzle (with Andrea Repetto and Jeremy Tobacman) in eds. | | | The 6D Bias and the Equity Premium Puzzle (with Xavier Gabaix).Benjamin Bernanke and Kenneth Rogoff ed., NBER Macroeconomics Annual, vol.16, 2002, p. | | | Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance (with James J. Choi, Brigitte C. Madrian, and Andrew Metrick,) in Tax Policy and the Economy 16, 2002, pp. |
|
http://www.economics.harvard.edu/faculty/laibson/papers.html
(645 words)
|
|
| |
| | CiteULike: The equity premium: A puzzle |
| | Restrictions that a class of general equilibrium models place upon the average returns of equity and Treasury bills are found to be strongly violated by the U.S. data in the 1889-1978 period. | | | We conclude that, most likely, an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return. | | | You can view related articles as a TouchGraph (Java required). |
|
http://www.citeulike.org/user/toomash/article/117301
(121 words)
|
|
|
