Empirical Evidence for the New Definitions in Financial Markets and Equity Premium Puzzle
arXiv:2305.03468 · doi:10.17233/sosyoekonomi.2026.02.17
Abstract
This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US financial markets from 1889-1978 are analyzed and the results indicate that equity investors who invested in the composite S&P 500 index were risk-averse in 1977. Conversely, risk-free asset investors who invested in US Treasury bills were found to exhibit not enough risk-loving behavior, which can be considered a type of risk-averse behavior. These findings suggest that the new definitions in financial markets accurately reflect the behavior of investors and should be considered in investment strategies.
21 pages, 3 tables, 1 figure; 1 new theorem and 4 new definitions are added