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Discussion Paper Details

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Title: C-CAPM Without Ex Post Data

Author(s): Paul Söderlind

Publication Date: December 2005

Keyword(s): CBOE VIX, equity premium puzzle, Livingston survey and Survey of Professional Forecasters

Programme Area(s): International Macroeconomics

Abstract: Survey and option data are used to take a new look at the equity premium puzzle. Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data (CBOE's VIX) indicates that investors overestimate the volatility of equity returns. Both facts reduce the puzzle. However, data on beliefs about output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is somewhat less of a puzzle than in ex post data.

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Bibliographic Reference

Söderlind, P. 2005. 'C-CAPM Without Ex Post Data'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5407