Solving the equity risk premium puzzle and inching toward a theory of everything

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)45-63
Journal / PublicationJournal of Private Equity
Issue number2
Online published26 Feb 2018
Publication statusPublished - 1 Mar 2018


The crux of the equity premium puzzle is that the return on equities has far exceeded the average return on short-term, risk-free debt and cannot be explained by conventional representative-agent, consumption-based equilibrium models. The author reviews several attempts undertaken over the years to explain this anomaly and explores whether a fusion of the approaches supplemented with better methods to handle various reservations would provide a more realistic and yet tractable framework to tackle the various conundrums in the social sciences. The rationale for a unified theory is that beauty can emerge from chaos and many long-standing puzzles seem to have been resolved using different techniques.

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