Download This PaperInternational Evidence on the Equity Premium Puzzle and Time Discounting
Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 149-163
15 Pages Posted: 31 Jul 2012 Last revised: 16 Feb 2015
There are 2 versions of this paper
International Evidence on the Equity Premium Puzzle and Time Discounting
International Evidence on the Equity Premium Puzzle and Time Discounting
Date Written: April 26, 2013
Abstract
We elicit time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premium across 27 countries. It implies that in countries where participants tend to be more short-term oriented, higher historical equity risk premiums are observed. This finding is consistent with the explanation of equity premium puzzle by myopic loss aversion. We investigate the mediational effect of time preference between Hofstede's Uncertainty Avoidance cultural dimension and equity risk premium.
Keywords: equity risk premium, time discounting, myopic loss aversion, cultural finance
JEL Classification: G02, G11, D81
Suggested Citation: Suggested Citation
Norwegian School of Economics and Business Administration (NHH)
Helleveien 30
Bergen, 5045
Norway
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior
By John Y. Campbell and John H. Cochrane
-
By Force of Habit: A Consumption-Based Explanation of Plantation of Aggregate Stock Market Behavior
By John Y. Campbell and John H. Cochrane
-
Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing
By John Heaton and Deborah J. Lucas
-
Asset Prices Under Habit Formation and Catching Up with the Joneses
-
Implications of Security Market Data for Models of Dynamic Economies
-
Myopic Loss Aversion and the Equity Premium Puzzle
By Shlomo Benartzi and Richard H. Thaler