Technological Growth and Asset Pricing

Nicolae B. Gârleanu, Stavros Panageas and Jianfeng Yu

No 15340, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we study the implications of general-purpose technological growth for asset prices. The model features two types of shocks: "small", frequent, and disembodied shocks to productivity and "large" technological innovations, which are embodied into new vintages of the capital stock. While the former affect the economy on impact, the latter affect the economy with lags, since firms need to first adopt the new technologies through investment. The process of adoption leads to cycles in asset valuations and risk premia as firms convert the growth options associated with the new technologies into assets in place. This process can help provide a unified, investment-based view of some well documented phenomena such as the asset-valuation patterns around major technological innovations, the countercyclical behavior of returns, the lead-lag relationship between the stock market and output, and the increasing patterns of consumption-return correlations over longer horizons.

JEL-codes: E22 G12 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-cfn, nep-dge and nep-mac
Note: AP EFG
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Citations: View citations in EconPapers (22)

Published as “Technological Growth and Asset Pricing” (joint with Nicolae Garleanu and Jianfeng Yu) , Journal of Finance, August 2012, Vol. 67, Issue 4, pp. 1265-1292

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Journal Article: Technological Growth and Asset Pricing (2012)
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