APPLICATION OF BEHAVIORAL FINANCE IN MODELING BULGARIAN EQUITY RISK PREMIUM

dc.contributor.author	Pavlov, Tsvetan
dc.date.accessioned	2016-05-18T08:03:54Z
dc.date.available	2016-05-18T08:03:54Z
dc.date.issued	2015
dc.identifier.issn	0861-6604
dc.identifier.uri	http://hdl.handle.net/10610/1419
dc.description.abstract	The paper seeks a plausible explanation of the magnitude of equity risk premium, by modeling leading behavioral concepts in the conditions of Bulgarian capital market. Firstly, the fair equity risk premium is derived by basic neoclassical consumption-based model. Subsequently, the conducted comparison between fair and empirical risk premium indicates that the demanded compensation by investors for owning Bulgarian stocks cannot be rationally explained, i.e. there is an equity risk premium puzzle on BSE. On this basis, we have applied a behavioral model based on two well-known characteristics of human behavior in conditions of risk and uncertainty – loss aversion and narrow framing. Set at reasonable levels of risk and loss aversion, the model has managed to generate risk-free rate and market returns close to empirical levels.	bg_BG
dc.language.iso	en	bg_BG
dc.publisher	АИ "Ценов"	bg_BG
dc.relation.ispartofseries	2;10
dc.subject	behavioral finance	bg_BG
dc.subject	equity risk premium puzzle	bg_BG
dc.subject	market efficiency	bg_BG
dc.subject	capital markets	bg_BG
dc.subject	required return	bg_BG
dc.title	APPLICATION OF BEHAVIORAL FINANCE IN MODELING BULGARIAN EQUITY RISK PREMIUM	bg_BG
dc.type	Article	bg_BG