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Capital Share Risk in U.S. Asset Pricing

Martin Lettau, Sydney Ludvigson () and Sai Ma

No 20744, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A single macroeconomic factor based on growth in the capital share of aggregate income exhibits significant explanatory power for expected returns across a range of equity characteristic portfolios and non-equity asset classes, with risk price estimates that are of the same sign and similar in magnitude. Positive exposure to capital share risk earns a positive risk premium, commensurate with recent asset pricing models in which redistributive shocks shift the share of income between the wealthy, who finance consumption primarily out of asset ownership, and workers, who finance consumption primarily out of wages and salaries.

JEL-codes: E25 G11 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2014-12
Note: AP CF EFG
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Published as MARTIN LETTAU & SYDNEY C. LUDVIGSON & SAI MA, 2019. "Capital Share Risk in U.S. Asset Pricing," The Journal of Finance, vol 74(4), pages 1753-1792.

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