The Equity Premium (EPP) conundrum refers to the excessively high historical predominance of equities over Treasury bills, which is difficult to explain.
Theoretically, the premium should be much lower than the historical average between 5% and 8%.
The prospect theory of Daniel Kahneman and Amos Tversky, the role of personal debt, the importance of liquidity, the impact of government regulation, and tax considerations have been applied to the puzzle.
Lack of knowledge in the past, the depreciation of the US dollar against gold, the benefits of diversification, and population growth are all possible solutions to the equity premium puzzle.