Funny Futures
The equity premium puzzle is one of the longest standing anomalies in finance: the finding that stockmarket investing outperforms other types of investment by a significant amount. Generally you’d expect the price of shares to rise until this advantage was cancelled out, but this hasn’t happened and has made quite a lot of futurologists look rather silly.
It turns out, though, that the equity premium puzzle may be even more puzzling than it first appears. Basically researchers aren’t exactly sure how large it is, or even if it exists at all. So is the idea that stocks always outperform other investments in the long run just another market myth used to cajole unwary investors into parting with their hard-earned cash?
