TY  - BOOK
AU  - Albuquerque,Rui
AU  - Eichenbaum,Martin S.
AU  - Rebelo,Sergio
ED  - National Bureau of Economic Research.
TI  - Valuation Risk and Asset Pricing
T2  - NBER working paper series
PY  - 2012///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - December 2012; Hardcopy version available to institutional subscribers
N2  - 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
UR  - https://www.nber.org/papers/w18617
UR  - http://dx.doi.org/10.3386/w18617
ER  -