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Technological Growth and Asset Pricing

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  • Nicolae B. Gârleanu
  • Stavros Panageas
  • Jianfeng Yu

Abstract

In this paper we study the implications of general-purpose technological growth for asset prices. The model features two types of shocks: "small", frequent, and disembodied shocks to productivity and "large" technological innovations, which are embodied into new vintages of the capital stock. While the former affect the economy on impact, the latter affect the economy with lags, since firms need to first adopt the new technologies through investment. The process of adoption leads to cycles in asset valuations and risk premia as firms convert the growth options associated with the new technologies into assets in place. This process can help provide a unified, investment-based view of some well documented phenomena such as the asset-valuation patterns around major technological innovations, the countercyclical behavior of returns, the lead-lag relationship between the stock market and output, and the increasing patterns of consumption-return correlations over longer horizons.

Suggested Citation

  • Nicolae B. Gârleanu & Stavros Panageas & Jianfeng Yu, 2009. "Technological Growth and Asset Pricing," NBER Working Papers 15340, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15340 Note: AP EFG
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    Cited by:

    1. Kalyvitis Sarantis & Panopoulou Ekaterini, 2013. "Estimating C-CAPM and the equity premium over the frequency domain," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(5), pages 551-571, December.
    2. Hanno Lustig, "undated". "Exploring the Link between Housing and the Value Premium (joint with Stijn Van Nieuwerburgh)," UCLA Economics Online Papers 389, UCLA Department of Economics.
    3. Jack Favilukis & Xiaoji Lin, 2011. "Micro Frictions, Asset Pricing and Aggregate," FMG Discussion Papers dp673, Financial Markets Group.
    4. Mariano Max Croce, 2010. "Tax Uncertainty, Leverage and Asset Prices," 2010 Meeting Papers 1084, Society for Economic Dynamics.
    5. Xiaoji Lin & Jack Favilukis, 2011. "Micro Frictions, Asset Pricing, and Aggregate Implications," 2011 Meeting Papers 466, Society for Economic Dynamics.
    6. Missaka Warusawitharana, 2011. "The expected real return to equity," Finance and Economics Discussion Series 2011-14, Board of Governors of the Federal Reserve System (U.S.).
    7. Gourio, François, 2011. "Putty-clay technology and stock market volatility," Journal of Monetary Economics, Elsevier, vol. 58(2), pages 117-131, March.
    8. Lustig, Hanno & Syverson, Chad & Van Nieuwerburgh, Stijn, 2011. "Technological change and the growing inequality in managerial compensation," Journal of Financial Economics, Elsevier, vol. 99(3), pages 601-627, March.
    9. Belo, Frederico, 2010. "Production-based measures of risk for asset pricing," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 146-163, March.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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