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1. 1. Risk Attitudes and the Equity Premium Puzzle: empirical tests in a cross-country setting

   University essay from Handelshögskolan i Stockholm/Institutionen för finansiell ekonomi

   Author : Max Rylander; [2015]
   Keywords : Equity Premium Puzzle; Myopic Loss Aversion; Ambiguity Aversion; Cultural dimensions; Cultural stationarity;

   Abstract : This study utilises panel data, Equity Home Bias measurements and a two-stage estimation process incorporating one version of the international CAPM to extract comparable input data and test country-scores for risk preferences, risk aversion and time discounting as well as country scores on broader cultural dimensions, on country-estimates of the Equity Risk Premia. The risk attitude scores, which just recently have been made available, are such that they may proxy for irrational behaviours which have been theorized to explain the Equity Premium Puzzle, and enable a rigorous way to empirically test such an effect. READ MORE