Work

Innovation, Growth, and Asset Prices

Year: 2015

Type: article

Abstract: ABSTRACT We examine the asset pricing implications of a production economy whose long‐term growth prospects are endogenously determined by innovation and R&D. In equilibrium, R&D endogenously drives a small, persistent component in productivity that generates long‐run uncertainty about economic growth. With recursive preferences, households fear that persistent downturns in economic growth are accompanied by low asset valuations and command high‐risk premia in asset markets. Empirically, we find substantial evidence for innovation‐driven low‐frequency movements in aggregate growth rates and asset market valuations. In short, equilibrium growth is risky.

Source: The Journal of Finance

DOI: 10.1111/jofi.12241

Authors: HOWARD KUNG, LUKAS SCHMID

Institutions: University of California, Los Angeles, London Business School, Carnegie Mellon University

Language: English

Topic: Economic theories and models

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W2525373672

FWCI: 69.23

Cites: 56

Cited by: 350

Related to: 10