Liquidity Shocks and Asset Prices
Pablo Guerron and
Ryo Jinnai ()
No HIAS-E-17, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University
In models of liquidity, stock market booms tend to follow adverse liquidity shocks. This result is clearly at odds with the data. We demonstrate that allowing for endogenous productivity corrects this puzzling price dynamics. Negative growth prospects decrease equity prices because of a long-run predictable component in dividend growth.
Keywords: liquidity; asset prices; endogenous growth; long-run risk (search for similar items in EconPapers)
Pages: 18 p.
New Economics Papers: this item is included in nep-dge and nep-mac
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Working Paper: On Liquidity Shocks and Asset Prices (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-17
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