The equity premium: it's still a puzzle

Narayana Kocherlakota

No 102, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis

Abstract: The paper examines the literature that attempts to resolve the equity premium and riskfree rate puzzles. It demonstrates that the puzzles will confront any model of asset prices that relies on three crucial assumptions: preferences have a particular parametric form, asset markets are complete, and asset trade is frictionless. A survey of the literature that relaxes these assumptions reveals that there are now several plausible explanations of the seemingly low riskfree rate, but the large size of the equity premium remains a puzzle.

Keywords: Investments (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: The Equity Premium: It's Still a Puzzle (1996)
Working Paper: The Equity Premium: It's Still a Puzzle (1995)
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