The Equity Premium Puzzle: Explanations and Implications
Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity and premium puzzle. As would be expected, the greater the deviation from the first-best outcome implied by a given explanation of the equity premium puzzle, the more interventionist are the implied policy conclusions. Nevertheless, even explanations of the equity premium puzzle...[Show more]
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