Why Stocks Outperform Bonds So Dramatically

For over a century, stocks have consistently beaten government bonds by a margin that defies standard economic logic. Economists are baffled because they cannot find a rational reason for this massive gap in returns.

Standard financial theories suggest investors should only accept higher risk if there is a modest reward for doing so. However, historical data shows the actual gap between stock market gains and safe bond interest is surprisingly large. This discrepancy is known as the equity premium puzzle. Experts have spent decades trying to reconcile this gap with human behavior and market efficiency, yet the mystery remains a centerpiece of modern economic debate.