A New Perspective on the Equity Premium Puzzle

10 Pages Posted: 31 Jan 2017

See all articles by Hammad Siddiqi

Hammad Siddiqi

University of the Sunshine Coast-School of Business

Date Written: January 30, 2017

Abstract

The general conclusion of a very large literature on the equity premium puzzle is that the simplest version of the consumption-based asset pricing model (C-CAPM) with time-additive, power utility is inconsistent with the data. I show that this conclusion is premature and the simplest version can account for high equity premium and other puzzles if decision-maker reliance on informative starting points is incorporated in the model.

Keywords: Equity-Premium Puzzle, Anchoring-and-Adjustment

JEL Classification: G10, G11, D0, G02

Suggested Citation

Siddiqi, Hammad, A New Perspective on the Equity Premium Puzzle (January 30, 2017). Available at SSRN: https://ssrn.com/abstract=2908646 or http://dx.doi.org/10.2139/ssrn.2908646

Hammad Siddiqi (Contact Author)

University of the Sunshine Coast-School of Business ( email )

Brisbane, QLD 70010
Australia
+61404900497 (Phone)

HOME PAGE: http://www.usc.edu.au/staff-repository/dr-hammad-siddiqi

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