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Historical data for the S&P 500 Index show an average excess return over Treasury bills of about 7.5% with standard deviation of about 20%. To
Historical data for the S\&P 500 Index show an average excess return over Treasury bills of about 7.5% with standard deviation of about 20%. To the extent that these averages approximate investor expectations for the sample period, what must have been the coefficient of nisk aversion of the average investor? If the coefficient of risk aversion were 3.5 , what risk premium would have been consistent with the market's historical standard deviation
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