Economic puzzle

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A puzzle in economics is a situation where the outcome of theory is more plausible than the observed behaviour or where this behaviour is yet unexplained by theory.

An example might be 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. Equity Premium Puzzle was first documented by Mehra and Prescot (1985).

[edit] List of puzzles

• Equity premium puzzle
• International diversification puzzle
• Long-run volatility puzzle of the real exchange rate, also known as PPP puzzle
• Retirement-consumption puzzle
• Missing trade puzzle, also known as Border puzzle