Categories
Investments glossary

Equity Premium Puzzle (EPP)

Spread the love


Quotes of the day:

Love cannot endure indifference. It needs to be wanted. Like a lamp, it needs to be fed out of the oil of another\'s heart, or its flame burns low.

— Henry Ward Beecher

The equity premium puzzle (EPP) is a phenomenon that describes the anomalously higher historical real returns of stocks over government bonds. The equity premium, which is defined as equity returns minus bond returns, has been approximately 6.4% on average over a 100+ year period in the U.S. The premium is supposed to reflect the relative risk of stocks compared to risk-free government bonds, but the puzzle arises because this unexpectedly large percentage implies an unreasonably high level of risk aversion among investors.



We uses YouTube API Services.

Click to rate this post!
[Total: 0 Average: 0]

Leave a Reply