Distribution Risk and Equity Returns

Jean-Pierre Danthine, Paolo Siconolfi and John B Donaldson

No 5425, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper we entertain the hypothesis that observed variations in income shares are the result of changes in the balance of power between workers and capital owners in labour relations. We show that this view implies that income share variations represent a risk factor of first-order importance for the owners of capital and, consequently, are a crucial determinant of the return to equity. When both risks are calibrated to observations, this distribution risk dominates in importance the usual systematic risk for the pricing of assets. We also show that distribution risks may originate in non-traded idiosyncratic income shocks.

Keywords: Income shares; Distribution risk; Equity premium; Limited market participation (search for similar items in EconPapers)
JEL-codes: E3 G1 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-fin, nep-fmk, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP5425 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Distribution Risk and Equity Returns (2005)
Working Paper: Distribution Risk and Equity Returns (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5425

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5425

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().