International Evidence on the Equity Premium Puzzle and Time Discounting
15 Pages Posted: 18 Jun 2015
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International Evidence on the Equity Premium Puzzle and Time Discounting
Date Written: June 17, 2015
Abstract
We examine time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premiums across 27 countries. This result implies that higher historical equity risk premiums are observed in countries where survey participants tend to be more short-term oriented. This finding is consistent with the explanation of the equity premium puzzle provided by myopic loss aversion.
Keywords: equity risk premium; time discounting; myopic loss aversion; cultural finance
JEL Classification: G02, G11, D81
Suggested Citation: Suggested Citation