Historically, the premium in the rate of return in stock markets over the less risky bond
markets has been much higher than can be explained by standard economic theory with
reasonable rate of risk aversion. Which of the following factors might explain a part of
this unusually high risk premium?
a. Non-availability of adequate number of assets to diversify risk.
b. Presence of non-diversifiable risks like labor income risk.
c. Behavioral biases.
d. All of the above