The equity premium puzzle: new evidence on the optimal holding period and optimal asset allocation

Evanthia Zervoudi and Spyros Spyrou

Review of Behavioral Finance, 2016, vol. 8, issue 1, 39-57

Abstract: Purpose - – The purpose of this paper is to report new original evidence on optimal holding periods and optimal asset allocations (Benartzi and Thaler, 1995). Design/methodology/approach - – The authors employ a number of different value functions, a recent dataset, different markets, and varying investment horizons. Findings - – The authors report original evidence across markets and over-time, employing different value functions and varying investment horizons. The results results indicate that, during the past decades, the optimal holding period (seven months during the whole period and four/five months during crises) is not affected by the value function employed, is in accordance with the Myopic Loss Aversion hypothesis, is consistent across markets, but is sensitive to economic crises and shorter to that reported in Benartzi and Thaler (12 months). The optimal asset allocation is also different to that of Benartzi and Thaler during crises periods and/or assuming value functions with probability distortion. Originality/value - – The paper employs a number of different value functions, with and without probability distortion; it compares investor behavior in three important international markets (USA, UK, Germany); as a further robustness test the authors use various investment horizons.

Keywords: Equity premium puzzle; Probability distortion; Prospect theory (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:v:8:y:2016:i:1:p:39-57

DOI: 10.1108/RBF-12-2014-0052

Access Statistics for this article

Review of Behavioral Finance is currently edited by Professor Gulnur Muradoglu

More articles in Review of Behavioral Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().