arXiv subjects

Atilla Aras

Publications and source records attributed to Atilla Aras.

6 recordsLinked to original sources

arXiv2026

Exact Value Solution to the Equity Premium Puzzle

This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3 different equations. Furthermore, calculated values and risk behavior determination of my prior models were compatible with empirical literature. 4 unknown variables are now calculated from 4 different equations in the new derived model in this article. Subjective time discount factor and coefficient of relative risk aversion are found 0.9581 and 1.0319, respectively from the system of equations which are compatible with empirical studies. Micro and macro studies about CRRA value affirm each other for the first time in the literature. Furthermore, equity and risk-free asset investors are pinned down to be insufficient risk-loving, which can be considered a type of risk-averse behavior. Hence it can be said that calculated values and risk attitude determination align with empirical literature. This shows that derived model is valid and make CCAPM work without calibration.

q-fin.GN↗

arXiv2025

Solution to the Equity Premium Puzzle with Time-Varying Variables

The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of relative risk aversion around 4.40 by assuming the subjective time discount factors as 0.97, 0.98 and 0.99. CRRA becomes around 4.11 when the subjective time discount factor is assumed 0.96. These values are found compatible with empirical literature. Moreover, the risk-free asset and equity investors are determined as insufficient risk-loving investors in 1977, which can be considered a type of risk-averse behavior. The risk attitude determination also confirms the validity of the model. Hence, it can be stated that calculated values and risk behavior determination demonstrate the correctness of the derived model because results are robust.

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arXiv2023

Proofs for the New Definitions in Financial Markets

The aim of this study is to present proofs for new theorems. Basic thoughts of new definitions emerge from the decision-making under uncertainty in economics and finance. Shape of the certain utility curve is central to standard definitions in determining risk attitudes of investors. Shape alone determines risk behavior of investors in standard theory. Although the terms risk-averse, risk-loving, and risk-neutral are equivalent to strict concavity, strict convexity, and linearity, respectively, in standard theory, strict concavity or strict convexity, or linearity are valid for certain new definitions. The connection between the curvature of utility curve and risk attitude is broken for the new definitions. For instance, convex utility curve may show risk-averse behavior under new definitions. Additionally, this paper has proved that new definitions are richer than standard ones when shape is considered. Hence, it can be stated that new definitions are broader than standard definitions from the viewpoint of shape. With all of these, it has been demonstrated that the theorems and proofs in this study extend the standard utility theory in an important way.

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arXiv2023

Empirical Evidence for the New Definitions in Financial Markets and Equity Premium Puzzle

This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US financial markets from 1889-1978 are analyzed and the results indicate that equity investors who invested in the composite S&P 500 index were risk-averse in 1977. Conversely, risk-free asset investors who invested in US Treasury bills were found to exhibit not enough risk-loving behavior, which can be considered a type of risk-averse behavior. These findings suggest that the new definitions in financial markets accurately reflect the behavior of investors and should be considered in investment strategies.

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arXiv2021

Solution to the Equity Premium Puzzle Using the Sufficiency Factor of the Model

This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the value of the coefficient of relative risk aversion is 1.033526 by assuming the value of the subjective time discount factor to be 0.99. Since these values are compatible with the existing empirical studies, they confirm the validity of the newly derived model that provides the solution to the equity premium puzzle.

q-fin.GN↗

arXiv2020

Solution to the Equity Premium Puzzle

This study provides a solution of the equity premium puzzle. Questioning the validity of the Arrow-Pratt measure of relative risk aversion for detecting the risk behavior of investors under all conditions, a new tool, that is, the sufficiency factor of the model was developed to analyze the risk behavior of investors. The calculations of this newly tested model show that the value of the coefficient of relative risk aversion is 1.033526 by assuming the value of the subjective time discount factor as 0.99. Since these values are compatible with the existing empirical studies, they confirm the validity of the newly derived model that provides a solution to the equity premium puzzle.

q-fin.GN↗