We provide novel evidence on the driving forces behind the sharp increase in equity values over the post-war era. From the beginning of 1989 to the end of 2017, 23 trillion dollars of real equity wealth was created by the nonfinancial corporate sector. We estimate that 54% of this increase was...

Modigliani and Cohn [1979] hypothesize that the stock market suffers from money illusion, discounting real cash flows at nominal discount rates. While previous research has focused on the pricing of the aggregate stock market relative to Treasury bills, the money-illusion hypothesis also has...

We test whether the impact of financial constraints on firm value is observable in asset" returns. We form portfolios of firms based on observable characteristics related to financial" constraints, and test for common covariation in the stock returns of these firms. Using several" different...

Three mutually uncorrelated economic disturbances that we measure empirically explain 85% of the quarterly variation in real stock market wealth since 1952. A model is employed to interpret these disturbances in terms of three latent primitive shocks. In the short run, shocks that affect the...