The Puzzle of Stock Premium in Western Market and Its Enlightenment to Chinese Market

Yuchuan Zhou

2025

Abstract

The mystery of stock premium has been a curious issue for nearly a hundred years. This study discusses the origin of the puzzle of stock premium, the progress of western research and Its Enlightenment to China's capital market. The mystery of stock premium comes from Mehra and Prescott's research in 1985, which refers to the phenomenon that the real return of stocks is much higher than the risk-free interest rate, which is difficult to explain by the traditional CAPM model. Behavioural finance provides new explanations from the perspective of psychological bias and emotion, such as prospect theory, disposition effect, over trading. This paper analyses the causes of stock premium, including investor behaviour, market volatility, information asymmetry and so on, and points out its enlightenment to China's capital market, such as controlling inflation, reducing policy intervention, strengthening market supervision and information disclosure transparency. These results provide a useful reference for improving the institutional design and policy making of China's capital market, and promotes its healthy development.

Paper Citation

in Harvard Style

Zhou Y. (2025). The Puzzle of Stock Premium in Western Market and Its Enlightenment to Chinese Market. In Proceedings of the 2nd International Conference on E-commerce and Modern Logistics - Volume 1: ICEML; ISBN 978-989-758-775-7, SciTePress, pages 82-86. DOI: 10.5220/0013833100004719

in Bibtex Style

@conference{iceml25,
author={Yuchuan Zhou},
title={The Puzzle of Stock Premium in Western Market and Its Enlightenment to Chinese Market},
booktitle={Proceedings of the 2nd International Conference on E-commerce and Modern Logistics - Volume 1: ICEML},
year={2025},
pages={82-86},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013833100004719},
isbn={978-989-758-775-7},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 2nd International Conference on E-commerce and Modern Logistics - Volume 1: ICEML
TI - The Puzzle of Stock Premium in Western Market and Its Enlightenment to Chinese Market
SN - 978-989-758-775-7
AU - Zhou Y.
PY - 2025
SP - 82
EP - 86
DO - 10.5220/0013833100004719
PB - SciTePress