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Author: Kevin Rink Publisher: GRIN Verlag ISBN: 3640607759 Category : Languages : en Pages : 69
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 Schlo 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 or
Author: Kevin Rink Publisher: GRIN Verlag ISBN: 3640607759 Category : Languages : en Pages : 69
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 Schlo 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 or
Author: Edwin T. Burton Publisher: John Wiley & Sons ISBN: 1118331923 Category : Business & Economics Languages : en Pages : 261
Book Description
An in-depth look into the various aspects of behavioral finance Behavioral finance applies systematic analysis to ideas that have long floated around the world of trading and investing. Yet it is important to realize that we are still at a very early stage of research into this discipline and have much to learn. That is why Edwin Burton has written Behavioral Finance: Understanding the Social, Cognitive, and Economic Debates. Engaging and informative, this timely guide contains valuable insights into various issues surrounding behavioral finance. Topics addressed include noise trader theory and models, research into psychological behavior pioneered by Daniel Kahneman and Amos Tversky, and serial correlation patterns in stock price data. Along the way, Burton shares his own views on behavioral finance in order to shed some much-needed light on the subject. Discusses the Efficient Market Hypothesis (EMH) and its history, and presents the background of the emergence of behavioral finance Examines Shleifer's model of noise trading and explores other literature on the topic of noise trading Covers issues associated with anomalies and details serial correlation from the perspective of experts such as DeBondt and Thaler A companion Website contains supplementary material that allows you to learn in a hands-on fashion long after closing the book In order to achieve better investment results, we must first overcome our behavioral finance biases. This book will put you in a better position to do so.
Author: Rajnish Mehra Publisher: Now Publishers Inc ISBN: 1601980647 Category : Business & Economics Languages : en Pages : 97
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: Hersh Shefrin Publisher: Elsevier ISBN: 9780080482248 Category : Business & Economics Languages : en Pages : 618
Book Description
Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition
Author: Rajnish Mehra Publisher: Elsevier ISBN: 0080555853 Category : Business & Economics Languages : en Pages : 635
Book Description
Edited by Rajnish Mehra, this volume focuses on the equity risk premium puzzle, a term coined by Mehra and Prescott in 1985 which encompasses a number of empirical regularities in the prices of capital assets that are at odds with the predictions of standard economic theory.
Author: Robert Shuler Publisher: Lulu.com ISBN: 1304655369 Category : Business & Economics Languages : en Pages : 234
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: Hersh Shefrin Publisher: Now Publishers Inc ISBN: 1601983301 Category : Business & Economics Languages : en Pages : 196
Book Description
Behavioralizing Finance provides a structured approach to behavioral finance in respect to underlying psychological concepts, formal framework, testable hypotheses, and empirical findings.
Author: William N. Goetzmann Publisher: Oxford University Press ISBN: 0199881979 Category : Business & Economics Languages : en Pages : 576
Book Description
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.
Author: Zvi Bodie Publisher: McGraw Hill ISBN: 0077161157 Category : Business & Economics Languages : en Pages : 1081
Book Description
We are pleased to present this Global Edition, which has been developed specifically to meet the needs of internationalInvestment students. A market leader in the field, this text introduces major issues of concern to all investors and placesemphasis on asset allocation. It gives students the skills to conduct a sophisticated assessment of watershed current issuesand debates. Bodie Investments' blend of practical and theoretical coverage combines with a complete digital solution tohelp your students achieve higher outcomes in the course.
Author: Kevin Rink
Author: Kevin Rink
Author: Edwin T. Burton
Author: Rajnish Mehra
Author: Hersh Shefrin
Author: Rajnish Mehra
Author: Robert Shuler
Author: John H. Cochrane
Author: Hersh Shefrin
Author: William N. Goetzmann
Author: Zvi Bodie