Abstract: Whether China’s A-share market exists “equity premium puzzle” has always been argued with controversy. Based on considering the impact of macroeconomic factors, such as currency liquidity, overall tax revenue and the price level on the surplus consumption ratio, and then consumer behavior habit, we construct an analytical framework. It shows that the estimated relative risk aversion coefficient of investor lies in a reasonable range (0, 10). This result revises the implausible value of relative risk aversion coefficient according to the negative correlation between the market rate of return and individual consumption growth. It also successively explains the equity premium characteristics of the domestic A-share market and hence demonstrates that China stock market does not exist the so-called “equity premium puzzle” from a particular perspective.

Key words: equity premium, relative risk aversion coefficient, macroeconomic factor, China&rsquo, s A-share market