Asset Prices and Capital Share Risks: Theory and Evidence

Joseph Byrne, Boulis Maher Ibrahim and Xiaoyu Zong

MPRA Paper from University Library of Munich, Germany

Abstract: An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model with capital share risks.While modeling capital share risks, we account for the elevated consumption volatility of high income stockholders. Capital risks have strong volatility effects in our recursive asset pricing model. Empirical evidence is presented in which capital share growth is also a source of risk for stock return volatility. We uncover contrasting unconditional and conditional asset pricing evidence for capital share risks.

Keywords: Asset Pricing; Capital Share; Recursive Preference; Consumption Growth; Bayesian Methods. (search for similar items in EconPapers)
JEL-codes: C21 C30 E25 G11 G12 (search for similar items in EconPapers)
Date: 2020-05-12
New Economics Papers: this item is included in nep-fmk, nep-mac, nep-ore, nep-rmg and nep-upt
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https://mpra.ub.uni-muenchen.de/101781/1/MPRA_paper_101781.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/104282/1/MPRA_paper_104282.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/104984/1/MPRA_paper_104984.pdf revised version (application/pdf)

Related works:
Working Paper: Asset Prices and Capital Share Risks: Theory and Evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101781

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