Intangible Capital, Corporate Valuation and Asset Pricing
Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from the process by which physical capital accumulates. We study the implications of this hypothesis for rational firm valuation and asset pricing using a two-sector general equilibrium model. Our main finding is that the properties of firm valuation and stock prices are very dependent on the assumed accumulation process for intangible capital. If one entertains the possibility that intangible investments translates into capital stochastically, we find that plausible levels of macroeconomic volatility are compatible with highly variable corporate valuations, P/E ratios and stock returns.
|Date of creation:||Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/seriesEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Shiller, 1980.
"Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?,"
NBER Working Papers
0456, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
- Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
- Mehra, Rajnish & Prescott, Edward C., 1985.
"The equity premium: A puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 15(2), pages 145-161, March.
- Ellen R. McGrattan & Edward C. Prescott, 2000.
"Is the stock market overvalued?,"
Federal Reserve Bank of Minneapolis, issue Fall, pages 20-40.
- John Laitner & Dmitriy Stolyarov, 2003. "Technological Change and the Stock Market," American Economic Review, American Economic Association, vol. 93(4), pages 1240-1267, September.
- Robert G. King & Sergio T. Rebelo, 2000.
"Resuscitating Real Business Cycles,"
NBER Working Papers
7534, National Bureau of Economic Research, Inc.
- Danthine, Jean-Pierre & Donaldson, John B & Siconolfi, Paolo, 2005.
"Distribution Risk and Equity Returns,"
CEPR Discussion Papers
5425, C.E.P.R. Discussion Papers.
- Jean-Pierre DANTHINE & John B. DONALDSON & Paolo SICONOLFI, 2005. "Distribution Risk and Equity Returns," FAME Research Paper Series rp161, International Center for Financial Asset Management and Engineering.
- Jean-Pierre Danthine & John B. Donaldson & Paolo Siconolfi, 2005. "Distribution Risk and Equity Returns," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.10, Université de Lausanne, Faculté des HEC, DEEP.
- Danthine, Jean-Pierre & Donaldson, John B, 2002.
"Labour Relations and Asset Returns,"
Review of Economic Studies,
Wiley Blackwell, vol. 69(1), pages 41-64, January.
- Lawrence J. Christiano & Michele Boldrin & Jonas D. M. Fisher, 2001.
"Habit Persistence, Asset Returns, and the Business Cycle,"
American Economic Review,
American Economic Association, vol. 91(1), pages 149-166, March.
- Michele Boldrin & Lawrence J. Christiano & Jonas D.M. Fisher, 1999. "Habit persistence, asset returns and the business cycles," Working Paper Series WP-99-14, Federal Reserve Bank of Chicago.
- Michele Boldrin & Lawrence J. Christiano & Jonas D. M. Fisher, 2000. "Habit persistence, asset returns and the business cycle," Staff Report 280, Federal Reserve Bank of Minneapolis.
- Robert E. Hall, 1999.
"The Stock Market and Capital Accumulation,"
NBER Working Papers
7180, National Bureau of Economic Research, Inc.
- Carol Corrado & Charles Hulten & Daniel Sichel, 2005.
"Measuring Capital and Technology: An Expanded Framework,"
in: Measuring Capital in the New Economy, pages 11-46
National Bureau of Economic Research, Inc.
- Carol Corrado & Charles Hulten & Daniel Sichel, 2004. "Measuring capital and technology: an expanded framework," Finance and Economics Discussion Series 2004-65, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:lau:crdeep:06.05. 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: (Claudine Delapierre Saudan)
If references are entirely missing, you can add them using this form.