Investment-specific shocks, business cycles, and asset prices
- We introduce long-run investment productivity risk in a two-sector production economy to explain the joint behavior of macroeconomic quantities and asset prices. Long-run productivity risk in both sectors, for which we provide economic and empirical justification, acts as a substitute for shocks to the marginal efficiency of investments in explaining the equity premium and the stock return volatility differential between the consumption and the investment sector. Moreover, adding moderate wage rigidities allows the model to reproduce the empirically observed positive co-movement between consumption and investment growth.
| Author: | Giuliano Curatola, Michael DonadelliORCiDGND, Patrick GrüningGND, Christoph MeinerdingORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-395822 |
| URL: | http://ssrn.com/abstract=2747383 |
| Parent Title (English): | SAFE working paper series ; No. 129 |
| Series (Serial Number): | SAFE working paper (129) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2016 |
| Year of first Publication: | 2016 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2016/04/12 |
| Tag: | General Equilibrium Asset Pricing; Investment-Specific Shocks; Long-Run Risk; Nominal Rigidities; Production Economy |
| Issue: | This version: March 14, 2016 |
| Page Number: | 36 |
| HeBIS-PPN: | 381147053 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
