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In economics, a puzzle is a situation where the implication of theory is inconsistent with observed economic data.
An example is the equity premium puzzle, which relates to the fact that over the last two hundred years, the risk premium of stocks over bonds has been around 5.5%, much larger than expected from theory. The equity premium puzzle was first documented by Mehra and Prescot (1985).
List of puzzles
- Equity premium puzzle
- Home bias in trade puzzle
- Equity home bias puzzle
- Consumption correlations puzzle
- Feldstein-Horioka puzzle
- Forward premium anomaly
- Real exchange rate puzzles
- Retirement-consumption puzzle
- Missing trade puzzle, also known as Border puzzle
References
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