Solution to the Equity Premium Puzzle Using the Sufficiency Factor of the Model
General Finance
2022-09-05 v2
Abstract
This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the value of the coefficient of relative risk aversion is 1.033526 by assuming the value of the subjective time discount factor to be 0.99. Since these values are compatible with the existing empirical studies, they confirm the validity of the newly derived model that provides the solution to the equity premium puzzle.
Keywords
Cite
@article{arxiv.2110.14405,
title = {Solution to the Equity Premium Puzzle Using the Sufficiency Factor of the Model},
author = {Atilla Aras},
journal= {arXiv preprint arXiv:2110.14405},
year = {2022}
}
Comments
36 pages, 3 figures, 1 table