The equity premium: a deeper puzzle

Francisco Azeredo ()

Annals of Finance, 2014, vol. 10, issue 3, 347-373

Abstract: Traditional pre-1929 consumption measures understate the extent of serial correlation in the US annual real growth rate of per capita consumption of non-durables and services due to measurement limitations in the construction of their major components. Under alternative measures proposed in this study, the serial correlation of consumption growth is $$0.42$$ 0.42 for the $$1899$$ 1899 – $$2012$$ 2012 , contrary to the estimate of $$-0.15$$ - 0.15 under the traditional measures. This new evidence implies that the class of economies studied by Mehra and Prescott (J Monet Econ 15(2):145–161, 1985 ) generates a negative equity premium for reasonable risk aversion levels, thus, further exacerbating the equity premium puzzle. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: US consumption growth; Autoregressive process; Structural break; Persistence; Equity premium puzzle; Neoclassical growth model; E32; E44; G11; G13 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10436-014-0248-7 (text/html)
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:kap:annfin:v:10:y:2014:i:3:p:347-373

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10436/PS2

DOI: 10.1007/s10436-014-0248-7

Access Statistics for this article

Annals of Finance is currently edited by Anne Villamil

More articles in Annals of Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().