A study by Mehra and Prescott (1985) found that historical average excess returns
A) have been too small to be consistent with rational security pricing.
B) have been too large to be consistent with rational security pricing.
C) have been too small to be consistent with fractional security pricing.
D) prove CAPM is incorrect.
E) prove the market is efficient.

Question

Quizplus · Accepted Answer

The study by Mehra and Prescott (1985) found that historical average excess returns have been too large to be consistent with rational security pricing, challenging the conventional models of financial markets.

A Study by Mehra and Prescott (1985) Found That Historical