The classic answer is risk. Stocks are riskier than bonds, so they should be underpriced (and therefore have higher returns) than bonds.
But we know how risky stocks have been, historically. We can calculate how much higher a return that level of risk should lead to, under plausible risk tolerances. The equity premium puzzle is that the observed returns on stocks is significantly higher than this.
Read through the wikipedia page on the equity premium puzzle. It’s good.
The classic answer is risk. Stocks are riskier than bonds, so they should be underpriced (and therefore have higher returns) than bonds.
But we know how risky stocks have been, historically. We can calculate how much higher a return that level of risk should lead to, under plausible risk tolerances. The equity premium puzzle is that the observed returns on stocks is significantly higher than this.
Read through the wikipedia page on the equity premium puzzle. It’s good.