Mental Accounting and the Equity Premium Puzzle

We argue that the equity premium puzzle stems from a mismatch of applying mental accounting to experiments on risk aversion but not to the standard consumption based asset pricing model. If, as we suggest, one applies mental accounting consistently in both areas the degrees of risk aversions obtained coincide and the equity premium puzzle is gone.

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Year of publication:	2006-06-28
Authors:	Hens, Thorsten ; Woehrmann, Peter
Institutions:	Institut für Schweizerisches Bankwesen <Zürich>
Subject:	Portfoliomanagement \| portfolio management \| Risikoaversion

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Extent:	293888 bytes 31 p. application/pdf
Series:	Institut für Schweizerisches Bankwesen Zürich - Working Paper Series Working Paper ; 243 (2006)
Type of publication:	Book / Working Paper
Language:	English
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; G11 - Portfolio Choice ; G12 - Asset Pricing ; Corporate finance and investment policy. Other aspects ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10005858774