and Xiang zhang
Emanuel Alfranseder: Knut Wicksell Centre for Financial Studies, Lund University
Xiang zhang: Knut Wicksell Centre for Financial Studies, Lund University
Abstract: This paper introduces a model to explain the equity-premium puzzle. Consumers exhibit both pessimism and doubt. Consumers are pessimistic if their beliefs about the dividend are a translation of the objective dividend by an independent and identically distributed normal random variable with negative mean. Consumers exhibit doubt if their beliefs are a translation of the objective dividend by an independent and identically distributed normal random variable with mean zero. A cross-sectional empirical study using the SHARE database explores the differences between various European countries in terms of pessimism and doubt and tests the theoretical model empirically.
28 pages, April 1, 2015
Note: Full text versions of the paper: http://www.lusem.lu.se/media/kwc/working-papers/2015/ny_wp_2015_5_emanuel_xiang_web.pdf
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