International Evidence on the Equity Premium Puzzle and Time Discounting

15 Pages Posted: 18 Jun 2015

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

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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

Rieger, Marc Oliver and Wang, Mei and Hens, Thorsten, International Evidence on the Equity Premium Puzzle and Time Discounting (June 17, 2015). Multinational Finance Journal, Vol. 17, No. 3/4, p. 149-163, 2013, Available at SSRN: https://ssrn.com/abstract=2619660

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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