The equity premium puzzle

Article Abstract:

The equity premium puzzle creates a dilemma as to the return on investments offered by stocks as compared with Treasury bills. This puzzle is explained using several models: the longer time period, survivorship bias, the mean reversion and aversion and the myopic loss aversion. All of the models suggest that the equity premium may be brought about by the risks associated with stocks or is derived from other people's mistakes.

Economic aspects, Stocks, Treasury securities, Riddles

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Altered states: taxes and the location of foreign direct investment in America

Article Abstract:

The impact of state tax rates on domestic foreign direct investment (FDI) is investigated. The pattern of investments of foreigners in the US is compared with the pattern of investments from other countries. The effect of international taxation on FDI and the effect of subnational taxation on business location are examined. Results indicate that state tax rates have a substantial impact on domestic FDI location.

Research, Foreign investments, Taxation, Foreign tax credit

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Anomalies: the flypaper effect

Article Abstract:

Congress was able to shift federal revenues to state governments in 1835. The 104th Congress is contemplating to do this again. The expectation that state governments will use surplus funds to increase local spending has been found to be in contradiction to economic theory. The 'flypaper effect' describes the effect on spending of different grants to state and local governments.

Economic policy, National government, United States. Congress, Federal government, State government, State finance

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