Research On "The Mystery Of Equity Premium" In China’s Stock Market Based On Epstein Zin Weil Utility Function

Under the condition of traditional financial theory,utility function organically links commodity market and financial market,and the asset holding status of rational investors mainly depends on the return status of risky assets and risk-free interest rate level of investors’ risk aversion to the market In the U.S.market,from the view of utility function to explain the difference between stock yields and the risk-free interest rate value,need the relative risk aversion coefficient of investors for the 30 or so,but in the modern economy,the risk aversion coefficient is generally within the zero to 10,it do not tally with the theoretical value,this phenomenon is known as the equity premium puzzle.Based on Weil’s research.Epstein and Zin made a deeper derivation of the utility function.The original utility function did not set the first-order risk aversion attitude of investors,while Epstein-Zin-Weil believed that the premium of the stock market is directly related to the rate of return,which can not be explained by economics,but should be related to the volatility of the rate of return.This paper uses the stock return data of the main board market and gem from 2010 to 2021 and divides them into five time periods to compare the GMM generalized moment estimation results of the traditional utility model and the Epstein Zin Weil utility model.The conclusion shows that the relative risk aversion coefficient estimated by any utility function does not exceed the theoretical value in the main board market;In the GEM market,the relative risk aversion coefficient estimated by the traditional utility function is significantly greater than 10 in some intervals,while the estimated value of the Epstein Zin Weil utility function is greater than that of the main board market,although it does not exceed the reasonable range.Therefore,this paper takes the main board market and gem as the sample data of the whole stock market,The phenomenon of "the mystery of equity premium" exists in China;Therefore,this paper believes that we should not only pay attention to the equity premium of developed countries,but also pay more attention to the development of foreign capital market.