Myopic Loss Aversion and the Equity Premium Puzzle

@inproceedings{Benartzi1993MyopicLA,
  title={Myopic Loss Aversion and the Equity Premium Puzzle},
  author={S. Benartzi and R. Thaler},
  year={1993}
}
  • S. Benartzi, R. Thaler
  • Published 1993
  • Economics
  • The equity premium puzzle, first documented by Mehra and Prescott, refers to the empirical fact that stocks have greatly outperformed bonds over the last century. As Mehra and Prescott point out, it appears difficult to explain the magnitude of the equity premium within the usual economics paradigm because the level of risk aversion necessary to justify such a large premium is implausibly large. We offer a new explanation based on Kahneman and Tversky's 'prospect theory'. The explanation has… CONTINUE READING
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