{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,25]],"date-time":"2026-10-25T13:39:36Z","timestamp":1792935576439,"version":"4.5.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":30,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/www.uspto.gov\/ip-policy\/copyright-policy\/copyright-basics"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>The stock premium conundrum remains a significant challenge in financial economics, as conventional consumption-based asset-pricing frameworks fail to explain the historically elevated equity premium alongside the low risk-free rate observed in financial markets. This study develops a perpetual general equilibrium asset-pricing framework that incorporates Knightian uncertainty using fuzzy decision processes. We augment the Lucas asset-pricing model by including a triangle membership function to encapsulate the uncertainty in investors&amp;apos; anticipations for future income, and integrate this with Arrow\u2013Hurwicz optimism\u2013pessimism preferences under the constant relative risk aversion (CRRA) utility framework. The structure distinguishes between remuneration for standard financial risk and the additional premium associated with uncertain expectations and limited rationality. The results show that investor emotion and forecast uncertainty affect anticipated utility and equilibrium asset returns. In particular, a negative attitude may raise the stock premium while lowering the equilibrium risk-free rate, offering a behavioral rationale for the equity premium enigma without resorting to artificially heightened return volatility or excessive risk-aversion coefficients. It also illustrates how the interplay between ambiguity, investor sentiments, and risk aversion affects equilibrium results. This study offers a practical theoretical model that connects fuzzy-set theory with dynamic general equilibrium asset pricing to examine the impact of vague expectations on asset value and the interplay between uncertainty and financial returns.<\/jats:p>","DOI":"10.2139\/ssrn.7669039","type":"posted-content","created":{"date-parts":[[2026,10,25]],"date-time":"2026-10-25T12:40:12Z","timestamp":1792932012000},"source":"Crossref","is-referenced-by-count":0,"title":["Fuzzy Decision-Making and the Equity Premium Puzzle: Knightian Uncertainty in an Infinite-Horizon Asset Pricing Model"],"prefix":"10.2139","author":[{"given":"Shaohuo","family":"Chen","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","reference":[{"key":"ref1","article-title":"Multi-attribute group decision making method based on Pythagorean fuzzy Einstein interactive power averaging approach for sustainable cement industry","volume":"148","author":"T K Paul","year":"2023","journal-title":"Appl. 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