Empirical Evidence for the New Definitions in Financial Markets and Equity Premium Puzzle

Atilla Aras

No 2nw5g_v1, OSF Preprints from Center for Open Science

Abstract: This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US financial markets from 1889-1978 are analyzed and the results indicate that equity investors who invested in the composite S&P 500 index were risk-averse in 1977. Conversely, risk-free asset investors who invested in US Treasury bills were found to exhibit not enough risk-loving behavior, which can be considered a type of risk-averse behavior. These findings suggest that the new definitions in financial markets accurately reflect the behavior of investors and should be considered in investment strategies.

Date: 2023-05-05
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:2nw5g_v1

DOI: 10.31219/osf.io/2nw5g_v1

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