Equity premium puzzleThe equity premium puzzle refers to the inability of an important class of economic models to explain the average equity risk premium (ERP) provided by a diversified portfolio of U.S. equities over that of U.S. Treasury Bills, which has been observed for more than 100 years. There is a significant disparity between returns produced by stocks compared to returns produced by government treasury bills. The equity premium puzzle addresses the difficulty in understanding and explaining this disparity.
Financial modelingFinancial modeling is the task of building an abstract representation (a model) of a real world financial situation. This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project, or any other investment. Typically, then, financial modeling is understood to mean an exercise in either asset pricing or corporate finance, of a quantitative nature. It is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions.
Rational choice theoryRational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith. The theory postulates that an individual will perform a cost-benefit analysis to determine whether an option is right for them. It also suggests that an individual's self-driven rational actions will help better the overall economy. Rational choice theory looks at three concepts: rational actors, self interest and the invisible hand.
Future historyA future history is a postulated history of the future and is used by authors of science fiction and other speculative fiction to construct a common background for fiction. Sometimes the author publishes a timeline of events in the history, while other times the reader can reconstruct the order of the stories from information provided therein. The term appears to have been coined by John W. Campbell, Jr., the editor of Astounding Science Fiction, in the February 1941 issue of that magazine, in reference to Robert A.
The EconomistThe Economist is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by the Economist Group, with its core editorial offices in the United States, as well as across major cities in continental Europe, Asia, and the Middle East. In 2019, its average global print circulation was over 909,476; this, combined with its digital presence, runs to over 1.6 million.
