The Equity Premium in Brazil

Biehl, Carlos Augusto (2008) The Equity Premium in Brazil. [Dissertation (University of Nottingham only)] (Unpublished)

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This dissertation studies on one of the most famous puzzles in finance, the equity premium puzzle. The Equity Premium Puzzle has been studied repetitively in the financial literature since 1985, year of the publication of the of Mehra and Prescott work. The abundant number of studies and different explanations for the puzzle are revised as many theories have been offered to explain the equity premium puzzle.

The purpose of this dissertation is to analyze and valuate the existence of the Equity Premium in Brazil during the period from 1974 up to 2007. The Brazilian literature was revised and according to it, the existence of the Equity Premium Puzzle still under controversy.

Brazilian empirical data during different economic contexts is utilized for testing the existence and magnitude of the excess return on equity. The dissertation focuses the studied period from 1974 through 2007, altogether 34 years. This horizon time is very representative for the Brazilian economy. During the thirty four years analyzed, Brazil economy past through periods of high inflation, different government economic plans and finally a period of controlled inflation from 1994 through 2007.

This dissertation follows the steps utilized by Siegel (1992) in his work about the Equity Premium in the U.S. market. Siegel (1992) extended the time period analyzed by Mehra and Prescott (1985) back to 1802, while updating the returns on stocks and bonds to 1990.

This dissertation, so as Siegel (1992) study, follow a rational and quantitative analyzes of the market. Firstly, the nominal return indexes over the entire period are analyzed. Following, price levels and inflation are presented. Then, real return indexes before taxes and after taxes are displayed. Finally, the equity premium is presented. When the final real return indexes after taxes are demonstrated, the equity premium in the Brazilian economy becomes clear.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 26 Sep 2008
Last Modified: 23 Jan 2018 16:14

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