Wang, Qin, Yiheng Zou, Yu Ren and Zhuo Huang. 2015. “The spirit of capitalism and the equity premium.” Annals of Economics and Finance. 16:2: 493-513.
This paper evaluates whether the spirit of capitalism can explain the equity premium puzzle. The spirit of capitalism implies that investors acquire wealth not just for consumption, but also to improve their social status. We set up a consumption-based capital asset pricing model incorporating this component. The simulated results from our calibrated model match the mean and the volatility of the equity premium observed in the data.