For the individual investor, the equity premium may represent a reasonable reward for taking on the risk of buying shares such that they base their decisions to allocate assets to shares or bonds depending on how risk tolerant or risk averse they are. On the other hand, if the investor believes that the equity premium arise from mistakes and fears, they would capitalize on that fear and mistake and invest considerable portions of their assets in shares. Here, it is prudent to note that economists more commonly allocate significant portions of their asset in shares.
