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Institute for Financial Research SIFR Research Report Series, Institute for Financial Research

No 39:
C-CAPM without Ex Post Data

Paul Söderlind ()

Abstract: Survey and option data are used to take a new look at the equity premium puzzle. Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data (CBOE's VIX) indicates that investors overestimate the volatility of equity returns. Both facts reduce the puzzle. However, data on beliefs about output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is somewhat less of a puzzle than in ex post data.

Keywords: Equity premium puzzle; Livingston survey; CBOE VIX; Survey of professional forecasters; (follow links to similar papers)

JEL-Codes: E13; E32; G12; (follow links to similar papers)

16 pages, December 15, 2005

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