Equity Returns and the Output Shocks in a Dynamic Stochastic General Equilibrium Framework

Bahram Adrangi () and Juan Nicolás D’Amico
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Bahram Adrangi: Pamplin School of Business Administration, The University of Portland, 5000 N. Willamette Blvd., Portland, OR 97203, USA
Juan Nicolás D’Amico: Independent Researcher, Waterloo, ON N2L 3C5, Canada

JRFM, 2023, vol. 16, issue 5, 1-14

Abstract: We conducted a study analyzing the impact of productivity shocks on equity returns in the U.S. economy from Q1 1960 to Q1 2022 using an RBC DSGE model. Our results suggest that while initial productivity shocks lead to higher equity returns, this effect fades within eight quarters. Nonetheless, such shocks can still provide valuable signals for investors to strategically allocate their investments in sectors that may benefit the most. Our study also found that the responses of key macroeconomic variables, including real GDP, are consistent with those observed in other calibration based DSGE models of the U.S. in previous research.

Keywords: DSGE; impulse responses; total factor productivity shocks; real business cycle (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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