How the Wealth Was Won: Factor Shares as Market Fundamentals

Daniel Greenwald, Martin Lettau and Sydney Ludvigson

No 25769, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Why does the stock market rise and fall? From 1989 to 2017, the real per-capita value of corporate equity increased at a 7.2% annual rate. We estimate that 40% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25% of the increase, followed by a lower risk price (21%), and lower interest rates (14%). The period 1952 to 1988 experienced only one third as much growth in market equity, but economic growth accounted for more than 100% of it.

JEL-codes: G0 G12 G17 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-fdg and nep-his
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