How the Wealth Was Won: Factor Shares as Market Fundamentals

Martin Lettau, Sydney Ludvigson and Daniel Greenwald

No 14200, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We provide novel evidence on the driving forces behind the sharp increase in equity values over the post-war era. From the beginning of 1989 to the end of 2017, 23 trillion dollars of real equity wealth was created by the nonfinancial corporate sector. We estimate that 54% of this increase was attributable to a reallocation of rents to shareholders in a decelerating economy. Economic growth accounts for just 24%, followed by lower interest rates (11%) and a lower risk premium (11%). From 1952 to 1988 less than half as much wealth was created, but economic growth accounted for 92% of it.

JEL-codes: G10 G12 G17 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (18)

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Working Paper: How the Wealth Was Won: Factor Shares as Market Fundamentals (2019)
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