Speculative and non-speculative equity premia

Soroush Ghazi, Mark Schneider and Zachary Dorobiala

Economics Letters, 2024, vol. 236, issue C

Abstract: We decompose the equity premium into speculative and non-speculative premia. The non-speculative premium (14.7% annualized) renders the equity risk premium a bigger puzzle. Market volatility and the variance risk premium predict the non-speculative premium. Market sentiment predicts the speculative premium.

Keywords: Sentiment; Mispricing; Equity premium puzzle; Time-varying expected returns (search for similar items in EconPapers)
JEL-codes: D8 G40 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:236:y:2024:i:c:s0165176524001022

DOI: 10.1016/j.econlet.2024.111619

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