One of the main anomalies relating to the aggregate stock market is the equity premium puzzle.

1.1 Describe the equity premium. Why is it deemed to be a puzzle?

1.2. Discuss the difficulties associated with the calculation of the equity premium. 1.3. Many researchers consider that the equity premium is too high. Discuss this viewpoint. 1.4. Discuss the rational explanations for the equity premium puzzle. 1.5. What is the behavioural explanation for the equity premium puzzle?