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Inequality, stock market participation, and the equity premium

Favilukis, Jack - In: Journal of Financial Economics 107 (2013) 3, pp. 740-759

The last 30 years saw substantial increases in wealth inequality and stock market participation, smaller increases in consumption inequality and the fraction of indebted households, a decline in interest rates and the expected equity premium, as well as a prolonged stock market boom. In an...

Persistent link: https://www.econbiz.de/10010635949

Growth options, macroeconomic conditions, and the cross section of credit risk

Arnold, Marc; Wagner, Alexander F.; Westermann, Ramona - In: Journal of Financial Economics 107 (2013) 2, pp. 350-385

This paper develops a structural equilibrium model with intertemporal macroeconomic risk, incorporating the fact that firms are heterogeneous in their asset composition. Compared with firms that are mainly composed of invested assets, firms with growth options have higher costs of debt because...

Persistent link: https://www.econbiz.de/10010616816

Endogenous technological progress and the cross-section of stock returns

Lin, Xiaoji - In: Journal of Financial Economics 103 (2012) 2, pp. 411-427

I study the cross-sectional variation of stock returns and technological progress using a dynamic equilibrium model with production. Technological progress is endogenously driven by research and development (R&D) investment and is composed of two parts. One part is devoted to product innovation;...

Persistent link: https://www.econbiz.de/10010571661

The economics of options-implied inflation probability density functions

Kitsul, Yuriy; Wright, Jonathan H. - In: Journal of Financial Economics 110 (2013) 3, pp. 696-711

Recently a market in options based on consumer price index inflation (inflation caps and floors) has emerged in the US. This paper uses quotes on these derivatives to construct probability densities for inflation. We study how these probability density functions respond to news announcements and...

Persistent link: https://www.econbiz.de/10010709040

Investment shocks and the commodity basis spread

Yang, Fan - In: Journal of Financial Economics 110 (2013) 1, pp. 164-184

I identify a “slope” factor in the cross section of commodity futures returns: high-basis commodity futures have higher loadings on this factor than low-basis commodity futures. Combined with a level factor (an index of commodity futures), this slope factor explains most of the average...

Persistent link: https://www.econbiz.de/10011039220

The “out-of-sample” performance of long run risk models

Ferson, Wayne; Nallareddy, Suresh; Xie, Biqin - In: Journal of Financial Economics 107 (2013) 3, pp. 537-556

This paper studies the ability of long-run risk models to explain out-of-sample asset returns during 1931–2009. The long-run risk models perform relatively well on the momentum effect.

Persistent link: https://www.econbiz.de/10011039251

Money and liquidity in financial markets

Nyborg, Kjell G.; Östberg, Per - In: Journal of Financial Economics 112 (2014) 1, pp. 30-52

We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the market for liquidity leads banks to engage in what we term “liquidity pull-back,” which involves selling...

Persistent link: https://www.econbiz.de/10011039282

End-of-the-year economic growth and time-varying expected returns

Møller, Stig V.; Rangvid, Jesper - In: Journal of Financial Economics 115 (2015) 1, pp. 136-154

We show that macroeconomic growth at the end of the year (fourth quarter or December) strongly influences expected returns on risky financial assets, whereas economic growth during the rest of the year does not. We find this pattern for many different asset classes, across different time...

Persistent link: https://www.econbiz.de/10011115770

Macroeconomic linkages between monetary policy and the term structure of interest rates

Kung, Howard - In: Journal of Financial Economics 115 (2015) 1, pp. 42-57

This paper studies the equilibrium term structure of nominal and real interest rates and the time-varying bond risk premia implied by a stochastic endogenous growth model with imperfect price adjustment and monetary policy shocks. The production and price-setting decisions of firms drive...

Persistent link: https://www.econbiz.de/10011115774

Financial integration, housing, and economic volatility

Loutskina, Elena; Strahan, Philip E. - In: Journal of Financial Economics 115 (2015) 1, pp. 25-41

The Great Recession illustrates the sensitivity of the economy to housing. This paper shows that financial integration …, fostered by securitization and nationwide branching, amplified the positive effect of housing price shocks on the economy …-sponsored enterprises to measure housing price changes unrelated to fundamentals. Using this instrument, we find that house price shocks …

Persistent link: https://www.econbiz.de/10011115768

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