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Speculative and non-speculative equity premia

Author

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  • Ghazi, Soroush
  • Schneider, Mark
  • Dorobiala, Zachary

Abstract

We decompose the equity premium into speculative and non-speculative premia. The non-speculative premium (14.7% annualized) renders the equity risk premium a bigger puzzle. Market volatility and the variance risk premium predict the non-speculative premium. Market sentiment predicts the speculative premium.

Suggested Citation

  • Ghazi, Soroush & Schneider, Mark & Dorobiala, Zachary, 2024. "Speculative and non-speculative equity premia," Economics Letters, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:ecolet:v:236:y:2024:i:c:s0165176524001022
    DOI: 10.1016/j.econlet.2024.111619
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    References listed on IDEAS

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    More about this item

    Keywords

    Sentiment; Mispricing; Equity premium puzzle; Time-varying expected returns;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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