A Research On The Equity Premium Of Capital Market Of China

The equity premium puzzle has attracted numerous attentions since its first being raised. Researchers tried to explain this puzzle from different perspectives, and the later researchers make many modifications on the classical theory and put forward different explanations because the classical theory can't explain the puzzle reasonably. Though these theories explain the puzzle in some sense, hardly anyone was satisfying as a whole. The emergence of behavioral finance is bright to the puzzle. Its representative theory-myopic loss aversion theory can offer a relatively reasonable explanation to the equity premium puzzle. But the explanative force of these theories needs more proof in practice.The paper takes a systematic perspective at various theories, and then makes some empirical analysis of the level of the equity premium puzzle in capital market of china, considering our country's reality in the calculation of historical data and the relative rate of pay off. The paper concludes that the level of the equity premium in china is larger than that of the American, then analyze the factor which affect the equity premium. The discovery not only provides a very important empirical foundation to explain the high equity premium in china's stock market, but also provides the clues to the criterion and progress of capital market of china.