Kung, H and Schmid, L (2015) Innovation, Growth, and Asset Prices. Journal of Finance, 70 (3). pp. 1001-1037. ISSN 0022-1082
Abstract
We examine the asset pricing implications of a production economy whose long-term growth prospects are endogenously determined by innovation and R&D. In equilibrium, Rh&D endogenously drives a small, persistent component in productivity which generates long-run uncertainty about economic growth. With recursive preferences, households fear that persistent downturns in economic growth are accompanied by low asset valuations and command high risk premia in asset markets. Empirically, we find substantial evidence for innovation-driven low-frequency movements in aggregate growth rates and asset market valuations. In short, equilibrium growth is risky.
More Details
Item Type: | Article |
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Subject Areas: | Finance |
Additional Information: |
© 2015 The American Finance Association |
Date Deposited: | 02 Mar 2016 18:51 |
Last Modified: | 21 Nov 2024 02:33 |
URI: | https://lbsresearch.london.edu/id/eprint/17 |