IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v7y1994i4p781-801.html
   My bibliography  Save this article

Asset Prices in Dynamic Production Economies with Time-Varying Risk

Author

Listed:
  • Naik, Vasanttilak

Abstract

We examine the effect of changes in output uncertainty on the price of aggregate capital and on the prices of levered claims on capital. The relation between the volatility of the marginal product of capital and the price of capital depends on the level of capital adjustment costs and the elasticity of intertemporal substitution. For available estimates of this elasticity, the value of capital and risks are directly related while the value of levered equity claims on capital may be decreasing in risk. We use these results to analyze the argument that increased risk was responsible for the U.S. stock market decline of the 1970s. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Naik, Vasanttilak, 1994. "Asset Prices in Dynamic Production Economies with Time-Varying Risk," Review of Financial Studies, Society for Financial Studies, vol. 7(4), pages 781-801.
  • Handle: RePEc:oup:rfinst:v:7:y:1994:i:4:p:781-801
    as

    Download full text from publisher

    File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erik Brynjolfsson & Loren Hitt & Shinkyu Yang, 2002. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 137-198.
    2. Bekaert, Geert & Engstrom, Eric & Xing, Yuhang, 2009. "Risk, uncertainty, and asset prices," Journal of Financial Economics, Elsevier, vol. 91(1), pages 59-82, January.
    3. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
    4. Beltratti, Andrea, 2005. "Capital market equilibrium with externalities, production and heterogeneous agents," Journal of Banking & Finance, Elsevier, vol. 29(12), pages 3061-3073, December.
    5. Li, Qing & Vassalou, Maria & Xing, Yuhang, 2001. "An Investment-Growth Asset Pricing Model," CEPR Discussion Papers 3058, C.E.P.R. Discussion Papers.
    6. Jonathan B. Berk & Richard C. Green & Vasant Naik, 1999. "Optimal Investment, Growth Options, and Security Returns," Journal of Finance, American Finance Association, vol. 54(5), pages 1553-1607, October.
    7. Luigi Bocola & Nils Gornemann, 2013. "Risk, economic growth and the value of U.S. corporations," Working Papers 13-10, Federal Reserve Bank of Philadelphia.
    8. Padamja Singal & Stephen D. Smith, 1999. "Expected stock returns and volatility in a production economy: a theory and some evidence," FRB Atlanta Working Paper 99-8, Federal Reserve Bank of Atlanta.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:7:y:1994:i:4:p:781-801. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/sfsssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.