Asset Pricing and Portfolio Choice Theory_Kerry Back

Aggregate puzzles are puzzles regarding the market portfolio (commonly proxied by the market portfolio of stocks) and the risk-free rate. Much research focuses on the U.S. stock market. Based on the data in Kenneth French’s data library, the average annual U.S. stock market return from 1927 through 2013 was 11.89%. The standard deviation of the annual return was 20.47%. Over the same time period, the average annual Treasury bill return was 3.54%.