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The equity premium: A puzzle
Open accessAbstract
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. This result is robust to model specification and measurement problems. 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.
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Citations
Cited by
A Simple Model of Capital Market Equilibrium with Incomplete Information
MERTON, R. C. (1987) · The Journal of Finance · doi:10.1111/j.1540-6261.1987.tb04565.x · Cited by 5,811
FAMA, E. F. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04636.x · Cited by 5,350
By Force of Habit: A Consumption‐Based Explanation of Aggregate Stock Market Behavior
Campbell, J. Y., & Cochrane, J. H. (1999) · Journal of Political Economy · doi:10.1086/250059 · Cited by 5,210
Myopic Loss Aversion and the Equity Premium Puzzle
Benartzi, S., & Thaler, R. H. (1995) · The Quarterly Journal of Economics · doi:10.2307/2118511 · Cited by 2,487
Barsky, R. B., Juster, F. T., Kimball, M. S., & Shapiro, M. D. (1997) · The Quarterly Journal of Economics · doi:10.1162/003355397555280 · Cited by 2,400
Metadata
- Authors
- Mehra, R., & Prescott, E. C.
- Venue
- Journal of Monetary Economics
- Publisher
- Elsevier BV
- Published
- 1985-03
- Volume
- 15
- Issue
- 2
- Pages
- 145-161
- ISSN
- 0304-3932 (ISSN-L)
- OpenAlex
- W2570834760
- Cited by
- 5,535
- References
- 0
- FWCI
- 53.68
- Type
- journal article
- Language
- en
- Open access
- gold
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- Mehra, R., & Prescott, E. C. (1985). The equity premium: A puzzle. Journal of Monetary Economics. https://doi.org/10.1016/0304-3932(85)90061-3
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
