1 / 6

Behavioral Finance

Behavioral Finance. Economics 437. Equity Premium Puzzle. What is it? What explains it? Jorion and Goetzmann. Mehra and Prescott 1985. 90 years of data Average “real” annual yield of S&P500 = 7% Yield for short term debt < 1% Not consistent with presumed level of risk aversion.

holts
Download Presentation

Behavioral Finance

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Behavioral Finance Economics 437

  2. Equity Premium Puzzle • What is it? • What explains it? • Jorion and Goetzmann

  3. Mehra and Prescott 1985 • 90 years of data • Average “real” annual yield of S&P500 = 7% • Yield for short term debt < 1% • Not consistent with presumed level of risk aversion

  4. Update in 2003 by Mehra • Updates info up to 2000 • Looks at UK, Japan, Germany France • Similar Results

  5. Jorion & Goetzmann (2007) • Equity Premium Puzzle caused by “survivor bias” • What happens to a “global” portfolio • US equities from 1921 to 1996 had a “real” return of 4.3 % • Median return of all other countries was 0.8%

  6. The End

More Related