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42 THE RISK PREMIUM FACTOR CHAPTER RECAP Loss aversion is hardwired into us and drives a number of decision processes that seems to include how investors set prices in the stock market. Many studies have attempted and failed to link loss aversion to the equity risk premium. By showing that the risk premium is proportional to Treasury yields, the RPF Model establishes the connection between loss aversion the- ory and the ERP using real-world evidence that the market actually behaves this way.