Valuation Risk and Asset Pricing / Rui Albuquerque, Martin S. Eichenbaum, Sergio Rebelo.

By:

Albuquerque, Rui

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w18617.Publication details: Cambridge, Mass. National Bureau of Economic Research 2012.Description: 1 online resource: illustrations (black and white)Subject(s):

G12 - Asset Pricing • Trading Volume • Bond Interest Rates

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Abstract: Standard representative-agent models fail to account for the weak correlation between stock returns and measurable fundamentals, such as consumption and output growth. This failing, which underlies virtually all modern asset-pricing puzzles, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account for key asset pricing moments, such as the equity premium, the bond term premium, and the weak correlation between stock returns and fundamentals.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w18617 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

December 2012.

Standard representative-agent models fail to account for the weak correlation between stock returns and measurable fundamentals, such as consumption and output growth. This failing, which underlies virtually all modern asset-pricing puzzles, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account for key asset pricing moments, such as the equity premium, the bond term premium, and the weak correlation between stock returns and fundamentals.