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The equity premium puzzle and the ex post bias.
- Source :
- Applied Financial Economics; Jan2009, Vol. 19 Issue 2, p157-174, 18p, 8 Charts, 4 Graphs
- Publication Year :
- 2009
-
Abstract
- This article argues that high historical excess returns to equity were the result of a severe ex post bias in the period from 1915 to ca 1960 because inflation surprises during this period drove a wedge between ex ante and ex post returns to bonds. Furthermore, it is shown that ex ante and ex post returns to stocks are identical in a steady state. Adjusting the ex post equity premium by the ex post bias reduces the equity premium to an arithmetic mean of 3.3-4.4% over the past 132 years. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 09603107
- Volume :
- 19
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Applied Financial Economics
- Publication Type :
- Academic Journal
- Accession number :
- 36075840
- Full Text :
- https://doi.org/10.1080/09603100701765174