Subjective Expectations and Asset-Return Puzzles

@inproceedings{Weitzman2007SubjectiveEA,
  title={Subjective Expectations and Asset-Return Puzzles},
  author={Martin L. Weitzman},
  year={2007}
}
Three major puzzles, described later in this section, have captured the attention of macroeconomic finance: the equity-premium, riskfreerate and equity-volatility puzzles. A common strand of these three asset-return puzzles is that markets are behaving as if investors fear some unknown hidden randomness that isn’t obvious from the data. People are acting in the aggregate like there is much more marginal-utility–weighted subjective variability about future growth rates than past observations… CONTINUE READING
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