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Equity premium puzzle
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=== The equity premium: a deeper puzzle === Azeredo (2014) showed that traditional pre-1930 consumption measures understate the extent of serial correlation in the U.S. annual real growth rate of per capita consumption of non-durables and services ("consumption growth").<ref name=Azeredo2014/> Under alternative measures proposed in the study, the serial correlation of consumption growth is found to be positive. This new evidence implies that an important subclass of dynamic general equilibrium models studied by Mehra and Prescott (1985) generates negative equity premium for reasonable risk-aversion levels, thus further exacerbating the equity premium puzzle.
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