C-Capm Without Ex Post Data

18 Pages Posted: 22 Mar 2006

Multiple version iconThere are 2 versions of this paper

Date Written: December 2005

Abstract

Survey and option data are used to take a new look at the equity premium puzzle. Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data (CBOE's VIX) indicates that investors overestimate the volatility of equity returns. Both facts reduce the puzzle. However, data on beliefs about output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is somewhat less of a puzzle than in ex post data.

Keywords: Equity premium puzzle, Livingston survey, CBOE VIX, Survey of Professional Forecasters

JEL Classification: E130, E320, G12

Suggested Citation

Söderlind, Paul, C-Capm Without Ex Post Data (December 2005). CEPR Discussion Paper No. 5407, Available at SSRN: https://ssrn.com/abstract=892879

Paul Söderlind (Contact Author)

University of St. Gallen ( email )

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