SIFR Research Report Series, Institute for Financial Research
C-CAPM without Ex Post Data
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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