The equity premium puzzle and the ex post bias

• Autores: Jakob B. Madsen, Ratbek Dzhumashev
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 19, Nº. 1-3, 2009, págs. 157-174
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • This article argues that high historical excess returns to equity were the result of a severe ex post bias in the period from 1915 to ca 1960 because inflation surprises during this period drove a wedge between ex ante and ex post returns to bonds. Furthermore, it is shown that ex ante and ex post returns to stocks are identical in a steady state. Adjusting the ex post equity premium by the ex post bias reduces the equity premium to an arithmetic mean of 3.3-4.4% over the past 132 years.