International Evidence on the Equity Premium Puzzle and Time Discounting

Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 149-163

15 Pages Posted: 31 Jul 2012 Last revised: 2 Aug 2017

See all articles by Marc Oliver Rieger

Marc Oliver Rieger

University of Trier

Mei Wang

WHU - Otto Beisheim School of Management

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2013

Abstract

We elicit time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premium across 27 countries. It implies that in countries where participants tend to be more short-term oriented, higher historical equity risk premiums are observed. This finding is consistent with the explanation of equity premium puzzle by myopic loss aversion. We investigate the mediational effect of time preference between Hofstede's Uncertainty Avoidance cultural dimension and equity risk premium.

Keywords: equity risk premium, time discounting, myopic loss aversion, cultural finance

JEL Classification: G02, G11, D81

Suggested Citation

Rieger, Marc Oliver and Wang, Mei and Hens, Thorsten, International Evidence on the Equity Premium Puzzle and Time Discounting (April 26, 2013). Multinational Finance Journal, 2013, vol. 17, no. 3/4, pp. 149-163, Available at SSRN: https://ssrn.com/abstract=2120442 or http://dx.doi.org/10.2139/ssrn.2120442

Marc Oliver Rieger (Contact Author)

University of Trier ( email )

15, Universitaetsring
Trier, 54286
Germany

HOME PAGE: http://www.banking-finance.uni-trier.de

Mei Wang

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallender, 56179
Germany

Thorsten Hens

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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