Journal article
The Resource-Constrained Brain: A New Perspective on the Equity Premium Puzzle
Journal of Behavioral Finance, Vol.24(3), pp.315-332
2023
Abstract
Findings from brain sciences show that the brain must first optimize on its own internal resources before seeking to optimize on the resources available in the external world. We show that this modest change in perspective, from resource-constrained humans to resource-constrained brains, provides a new perspective on how assets are priced in financial markets. We show that the brain-centric perspective potentially lowers the risk aversion needed to reconcile consumption data with asset prices and can contribute to countercyclical equity premia. We show that the brain-centric perspective can be easily integrated with several existing approaches on the equity premium puzzle.
Details
- Title
- The Resource-Constrained Brain: A New Perspective on the Equity Premium Puzzle
- Authors
- Hammad Siddiqi (Author) - University of the Sunshine Coast, Queensland, School of Business and Creative IndustriesAustin Murphy (Author) - Oakland University
- Publication details
- Journal of Behavioral Finance, Vol.24(3), pp.315-332
- Publisher
- Routledge
- DOI
- 10.1080/15427560.2021.1975716
- ISSN
- 1542-7579
- Organisation Unit
- School of Business and Creative Industries; University of the Sunshine Coast, Queensland
- Language
- English
- Record Identifier
- 99572508902621
- Output Type
- Journal article
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- Domestic collaboration
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- Business, Finance
- Economics
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