The equity premium puzzle
Subtitle: a review
By: Rajnish Mehra
Series: Foundations and trends in finance -- v. 2, no. 1; Foundations and trends in finance -- v. 2, no. 1.
Publisher: Now
Published: 2008
Place of publication: Boston
Language: eng
Format: [electronic resource] :
Number of pages: 85
ISBN-13: 9781601980656; 9781601980649
Subjects: Investments & Securities; Stocks; Risk; BUSINESS & ECONOMICS
Description: Over two decades ago, Mehra and Prescott (1985) challenged the finance profession with a poser: the historical US equity premium is an order of magnitude greater than can be rationalized in the context of the standard neoclassical paradigm of financial economics. This regularity, dubbed "the equity premium puzzle," has spawned a plethora of research efforts to explain it away. In this review, the author takes a retrospective look at the original paper and explains the conclusion that the equity premium is not a premium for bearing non-diversifiable risk.
Notes: Title from PDF title page (viewed Jan. 24, 2008).

Offprint. Foundations and trends in finance (Online). Vol. 2, no. 1 (2006).

Includes bibliographical references.
Table of contents: title: Abstract; title: Introduction; title: Empirical facts; title: Variation in the equity premium over time; title: Is the equity premium a premium for bearing non-diversifiable risk?; title: Standard preferences; title: The risk-free rate puzzle; title: The effect of serial correlation in the growth rate of consumption; title: Hansen-Jagannathan bounds; title: Risk based explanations of the equity premium; title: Alternative preference structures; title: Habit formation; title: Resolution; title: The Campbell and Cochrane (1999) mechanism; title: Idiosyncratic and uninsurable income risk; title: Models incorporating a disaster state and survivorship bias; title: Behavioral models; title: Generalized disappointment aversion; title: Prospect theories; title: Non-risk based explanations of the equity premium; title: Borrowing constraints; title: The choice of a riskless asset; title: The effect of government regulations and rules; title: Taxes; title: Agent heterogeneity and intermediation costs; title: Concluding comments; title: Appendix; title: Acknowledgements; title: References; title: Updates.