Resource Allocation in the Brain and the Equity Premium Puzzle

37 Pages Posted: 18 Jun 2020 Last revised: 14 Apr 2021

See all articles by Hammad Siddiqi

Hammad Siddiqi

University of the Sunshine Coast-School of Business and Creative Industries

Date Written: July 19, 2020

Abstract

Findings from the brain sciences show that rather than assuming that human beings pursue their own self- interests, it is more accurate to say that the human brain does so. This is because the brain must first optimize on its own internal resources before seeking to optimize on the resources available in the external world. We show that this modest change is perspective, from self-interested human beings to self-interested brains can resolve the key macro-finance puzzles of broad interest: high equity premium which is countercyclical with a low and stable risk-free rate.

Keywords: Equity Premium, Countercyclical Equity Premium, Cognitive Factors in Decision Making, Resource Allocation in the Brain

JEL Classification: G12, G10, G00, G40, G41

Suggested Citation

Siddiqi, Hammad, Resource Allocation in the Brain and the Equity Premium Puzzle (July 19, 2020). Available at SSRN: https://ssrn.com/abstract=3609062 or http://dx.doi.org/10.2139/ssrn.3609062

Hammad Siddiqi (Contact Author)

University of the Sunshine Coast-School of Business and Creative Industries ( email )

Brisbane, QLD 70010
Australia
+61404900497 (Phone)

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

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