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Disequilibrating macro shocks affect different firms' prospects differently, increasing idiosyncratic variation in forward-looking stock returns before affecting economic growth. Consistent with most such shocks from 1947 to 2020 enhancing productivity, increased idiosyncratic stock return...
Persistent link: https://www.econbiz.de/10013210099
We find that procyclical stocks, whose returns comove with business cycles, earn higher average returns than countercyclical stocks. We use almost a three-quarter century of real GDP growth expectations from economists' surveys to determine forecasted economic states. This approach largely...
Persistent link: https://www.econbiz.de/10014544787
consequences of targeting larger liquid assets to key traders in markets, and to the most liquidity-sensitive links in supply …
Persistent link: https://www.econbiz.de/10013334487
The amount of information produced about firms' productivities and about the quality of collateral backing their loans varies over time. These information dynamics determine the evolution of credit, output and productivity, which feeds back into incentives to produce information. We characterize...
Persistent link: https://www.econbiz.de/10014322900
In line with Keynes' intuition, volatility in the stock market and in real economic activity are linked by expectations of long term profits. We show that analysts' optimism about the long term earnings growth of S&P 500 firms is associated with a near term boom in major US financial markets,...
Persistent link: https://www.econbiz.de/10014337811
banks may default because of fundamental or self-fulfilling runs. With only fundamental defaults, we show that the … competitive equilibrium is constrained efficient. However, when banks are vulnerable to runs, banks' leverage decisions are not ex …-ante optimal: individual banks do not internalize that higher leverage makes other banks more vulnerable. The theory calls for …
Persistent link: https://www.econbiz.de/10014528381
Using text from 200 million pages of 13,000 US local newspapers and machine learning methods, we construct a 170-year-long measure of economic sentiment at the country and state levels, that expands existing measures in both the time series (by more than a century) and the cross-section. Our...
Persistent link: https://www.econbiz.de/10014468226
We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...
Persistent link: https://www.econbiz.de/10014372444
We show that firms' nominal required returns to capital (i.e., their discount rates) are sticky with respect to expected inflation. Such nominally sticky discount rates imply that increases in expected inflation directly lower firms' real discount rates and thereby raise real investment. We...
Persistent link: https://www.econbiz.de/10014512092
We develop a model of self-fulfilling default cycles with demand externality a la Dixit- Stiglitz to explain the recurrent clustered defaults observed in the data. The literature reports that observable fundamental factors alone are insufficient to explain the cluster. A decline in aggregate...
Persistent link: https://www.econbiz.de/10014512145