equity premium puzzle(epp) refers to the problem of why there is a big difference between returns in stocks and risk-free investments historically. since stocks are much riskier than government bonds, the underinvestment in stocks relative to bonds supports the idea of loss aversion theory. specifically, it's the myopic loss aversion introduced by shlomo benartzi and richard thaler, which indicates the behavioural characteristics of "loss aversion" and "frequent evaluations" of investors. benartzi and thaler argue that loss-averse investors are more willing to take risks if they do not evaluate the performance of their investments frequently. in their model, investors are unwilling to accept return variability and tend to take a short-term view of their wealth.