The Equity Premium Puzzle, Intrinsic Growth & Monetary Policy An Unexpected Solution Theory & Strategy for the Coming Jobless Age PDF Download

Author: Robert Shuler
Publisher: Lulu.com
ISBN: 1304655369
Category : Business & Economics
Languages : en
Pages : 234

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Book Description
This book shows we must adjust money supply to account for productivity if deflation is to be avoided. The central banker is not profit oriented and can create money at will, not subject to rational investor constraints. Businesses leverage low interest rates enforced by the central bank to grow and increase employment, compensating for the reduced labor necessary for the former level of goods and services. This leveraged difference in returns is the equity premium. Even a one time productivity increase requires a corresponding permanent increase not in the money supply itself, but in the "rate of increase" of the money supply. Given the steady growth in productivity of the last 100 years, the world economy is now grossly under-stimulated and in danger of precipitous deflation. Both academic models and arguments based on historical events are presented, along with analysis of the meaning of money, investor behavior, and practical techniques for obtaining the equity premium in one's portfolio.

Author: Robert Shuler
Publisher:
ISBN: 9780991113002
Category : Finance
Languages : en
Pages : 272

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Book Description
The guy who discovered the equity premium does not invest in it. He is not the only one. High profile money managers routinely fail to measure up to the indexes they compare themselves to. That says a lot about why the equity "premium" is considered a puzzle. How would you get it if you wanted to? What is it? Stocks, also called equities, as a group not individually provide 7% to 8% higher returns than bonds or mortgages or most other kinds of investments whenever you look at periods 20 years or longer. How can the returns of a group of stocks be greater than the returns of individual stocks? It seems to violate arithmetic. The whole is greater than the sum of the parts because stock indexes are perpetual. They rotate in new companies which have achieved the requirements of the index (not flighty new issues) to replace older companies which are declining. You can do this. Change the lives of yourself and all your descendents. Might some of them live more than 20 years even if you don't? Learn how you can dramatically improve your investing style, why you should not worry about the FED, what you should have as long term goals instead of a career or retirement, why your career or small businesses is not diversified, the advantage of stocks over real estate or bonds, and how to rely more on being an investor. Learn the reasons behind market behavior, not simple prescriptions. Learn why stock picking is a bad idea, and what to do instead. Learn when and how to use credit, and why keeping your money in a bank may not be safe. Explore how your feelings about money and the origin of money influence you. Did you know the Roman Empire used almost no gold, and in the Bronze Age money was grain and you could eat it?

Author: Rajnish Mehra
Publisher: Now Publishers Inc
ISBN: 1601980647
Category : Business & Economics
Languages : en
Pages : 97

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Book Description
Over two decades ago, Mehra and Prescott (1985) challenged the finance profession with a poser: the historical US equity premium is an order of magnitude greater than can be rationalized in the context of the standard neoclassical paradigm of financial economics. This regularity, dubbed "the equity premium puzzle," has spawned a plethora of research efforts to explain it away. In this review, the author takes a retrospective look at the original paper and explains the conclusion that the equity premium is not a premium for bearing non-diversifiable risk

Author: Kevin Rink
Publisher: GRIN Verlag
ISBN: 3640607996
Category : Business & Economics
Languages : en
Pages : 62

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Book Description
Bachelor Thesis from the year 2010 in the subject Business economics - Business Management, Corporate Governance, grade: 1,0, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: Ever since the equity premium puzzle (EEP) was published by Mehra and Prescott (1985), it has become one of the most investigated problems in economics (Mehra, 2003, p. 54). The EEP describes the fact that we cannot link historic stock returns with the volatility of consumption growth (in a sense to be made precise below). Mehra and Prescott call this a puzzle as their consumption-based asset pricing model can not plausibly explain the S&P 500’s annual risk premium of 6.2% over relatively risk-free governmental treasury bills between 1889 and 1978. This model reproduces an equity premium of 6.2% solely by adapting unreasonable estimates of agents’ risk aversion (Mehra & Prescott, 1985, pp. 155-156). In this way, the model also predicts an extreme size of the risk-free rate (Cochrane, 2000, p. 416). Thus, the equity premium is not able to be explained exclusively by the risk of stock price fluctuations. (...) This thesis will examine the EPP from a behavioral perspective. The major research question to be pursued is this: How do behavioral approaches explain the equity premium puzzle? In order to answer this question, a variety of subtasks must be addressed. This includes the investigation of the initial model of Mehra and Prescott (1985) as well as its underlying assumptions. That is, in particular, needed because several well-established classical assumptions must be dropped to set up descriptive behavioral models. In addition, implications from psychology and behavioral economics must be introduced to answer the overall question of this thesis. Hence, the thesis will focus on the notions of loss aversion, narrow framing, and regret theory in an effort to explain the EPP. (...) The remainder of this thesis is organized as follows: Chapter 2 investigates the EPP and its predictions. This chapter considers potential failures of the model, especially the violations of expected utility theory which may lead to the puzzling results. Chapter 3 focuses on the behavioral concepts of prospect theory and mental accounting. Based on those concepts, chapter 4 deals with myopic loss aversion in an effort to explain the EPP. Chapter 5 discusses regret theory as another behavioral concept. This chapter also proposes an explanation of the EPP from a regret perspective. Chapter 6 concludes and discusses potential directions for future research.

Author: Robert Shuler
Publisher:
ISBN: 9781681422527
Category : Business & Economics
Languages : en
Pages : 324

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Book Description
The book presents a theory of a necessity to adjust money supply to account for productivity if deflation is to be avoided. The monetary agent (central banker) is a market participant who is not profit oriented and can create money at will, and thus not be subject to rational investor constraints. The monetary agent's power is similar to or greater than investor power in the market. Businesses leverage low interest rates enforced by the monetary agent to increase their activity, and growth rates, increasing employment to compensate for the reduced labor necessary to create the former level of goods and services. This leveraged difference in returns is the equity premium. Since productivity is a "rate" of production, even a one-time increase requires a corresponding permanent increase not in the money supply itself, but in the "rate of increase" of the money supply. Given the steady growth in productivity of the last 100 years, the world economy is now grossly under-stimulated and in danger of precipitous deflation. Both academic models and arguments based on historical events are presented, along with analysis of the meaning of money, investor behavior, and practical techniques for obtaining the equity premium in one's portfolio.

Author: Rajnish Mehra
Publisher:
ISBN:
Category :
Languages : en
Pages : 17

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Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 140

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Popular Mechanics inspires, instructs and influences readers to help them master the modern world. Whether it’s practical DIY home-improvement tips, gadgets and digital technology, information on the newest cars or the latest breakthroughs in science -- PM is the ultimate guide to our high-tech lifestyle.

Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 148

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Cincinnati Magazine taps into the DNA of the city, exploring shopping, dining, living, and culture and giving readers a ringside seat on the issues shaping the region.