Investment-specific shocks, business cycles, and asset prices

  • We introduce long-run investment productivity risk in a two-sector production economy to explain the joint behavior of macroeconomic quantities and asset prices. Long-run productivity risk in both sectors, for which we provide economic and empirical justification, acts as a substitute for shocks to the marginal efficiency of investments in explaining the equity premium and the stock return volatility differential between the consumption and the investment sector. Moreover, adding moderate wage rigidities allows the model to reproduce the empirically observed positive co-movement between consumption and investment growth.

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Metadaten
Author:Giuliano Curatola, Michael DonadelliORCiDGND, Patrick GrüningGND, Christoph MeinerdingORCiDGND
URN:urn:nbn:de:hebis:30:3-395822
URL:http://ssrn.com/abstract=2747383
Parent Title (English):SAFE working paper series ; No. 129
Series (Serial Number):SAFE working paper series (129)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/04/12
Tag:General Equilibrium Asset Pricing; Investment-Specific Shocks; Long-Run Risk; Nominal Rigidities; Production Economy
Issue:This version: March 14, 2016
Page Number:36
HeBIS-PPN:381147053
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht