Year of Graduation
Equity Premium Puzzle in C-CAPM Model
Equity premium puzzle in intertemporal asset pricing model Consumption-CAPM was studied in this paper. We considered whether there is a puzzle or not on annually data on the USA and Russian stock markets for 1927-2014 and 1996-2014 correspondingly, and monthly data on the USA market for 03.1959-07.2015. Moreover, there was an attempt to solve it by using a habit formation model in the framework of GMM method and by rare events approach. As a result, it was found that both approaches contribute to the normalization of risk-aversion coefficients, which means that the puzzle can be solved mathematically. However, there is no acceptable explanation from the economic point of view, so the problem requires further elaboration.