Rational Learning and the Term Structures of Value and Growth Risk Premia

Michael Hasler, Mariana Khapko and Roberto Marfe ()

No 622, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper studies the impact of information processing and rational learning about economic fundamentals on the level and timing of risk premium in the cross-section of firms. Learning helps explain the level of the value premium, and why the term structure of risk premium is increasing for value firms and decreasing for growth firms. Moreover, learning yields an upward-sloping term structure of interest rates and a downward-sloping term structure of market risk premium, whereas the full information economy predicts the opposite shapes. Therefore, rational learning helps understand the level and timing of expected returns observed in the cross-section of risky and risk-free assets.

Keywords: Asset Pricing; Rational Learning; Term Structures; Value and Growth Firms. (search for similar items in EconPapers)
JEL-codes: D51 D53 D83 G12 (search for similar items in EconPapers)
Pages: pages 52
Date: 2020
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:622

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