The Equity Premium: A Puzzle (1985)
by
Rajnish Mehra
,
Edward C. Prescott
| Venue: | Journal of Monetary Economics |
| Citations: | 582 - 13 self |
BibTeX
@ARTICLE{Mehra85theequity,
author = {Rajnish Mehra and Edward C. Prescott},
title = {The Equity Premium: A Puzzle},
journal = {Journal of Monetary Economics},
year = {1985},
volume = {15},
pages = {145--161}
}
Years of Citing Articles
OpenURL
Abstract
Restrictions that a class of general equilibrium models place upon the average returns of equity and Treasury bills are found to be strongly violated by the U.S. data in the 1889-1978 period. This result is robust to model specification and measurement problems. We conclude that, most likely, an equilibrium model which is not an Arrow-Debreu economy will be the one that Simultaneously rationalizes both historically observed large average equity return and the small average risk-free return. 1.







