Since individuals weight losses higher than gains,then any fall in stocks reduces utility much more than compensating gains.Therefore risky stocks are required to earn significantly higher returns over risk-rree assets because of the losses that may be suffered.However this alone is not sufficient to explain the puzzle.Since over long periods of time,stocks will always make gains (the market has a positive long-term trend although high short-run volatility).Therefore in addition we need to introduce short-term holding periods.Hence this explanation for the equity premium is referred to as Myopic Loss Aversion.There are many explanations for the phenomena,such as Framing Effects,Regret and so on.