Capital Share Risk in U.S. Asset Pricing

Martin Lettau, Sydney Ludvigson and Sai Ma

No 12628, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A single macroeconomic factor based on growth in the capital share of aggregate income exhibits signiÖcant explanatory power for expected returns across a range of equity characteristic portfolios and non-equity asset classes, with risk price estimates that are of the same sign and similar in magnitude. Positive exposure to capital share risk earns a positive risk premium, commensurate with recent asset pricing models in which redistributive shocks shift the share of income between the wealthy, who Önance consumption primarily out of asset ownership, and workers, who Önance consumption primarily out of wages and salaries.

Keywords: Value premium; Capital share; Labor share; Inequality (search for similar items in EconPapers)
JEL-codes: E25 G11 G12 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Capital Share Risk in U.S. Asset Pricing (2019)
Working Paper: Capital Share Risk in U.S. Asset Pricing (2014)
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