Finance & Investing · Investment Theory
A topic within Investment Theory, itself one of 11 topics in that field and part of Finance & Investing.
2 works
Aswath Damodaran
Argues the equity risk premium should be estimated forward, from current prices and expected cash flows, rather than backward from historical average returns, and works through why the two approaches give such different numbers in practice.
Rajnish Mehra & Edward C. Prescott
Shows that standard consumption-based asset pricing models can only reproduce the historical gap between stock and bond returns by assuming a degree of risk aversion nobody exhibits in any other economic decision, turning the equity premium from a stylised fact into an unsolved puzzle.