Technological Growth and Asset Pricing

Nicolae Gârleanu, Stavros Panageas, Jianfeng Yu

Research output: Contribution to journalArticlepeer-review

45 Scopus citations

Abstract

We study the asset-pricing implications of technological growth in a model with "small," disembodied productivity shocks and "large," infrequent technological innovations, which are embodied into new capital vintages. The technological-adoption process leads to endogenous cycles in output and asset valuations. This process can help explain stylized asset-valuation patterns around major technological innovations. More importantly, it can help provide a unified, investment-based theory for numerous well-documented facts related to excess-return predictability. To illustrate the distinguishing features of our theory, we highlight novel implications pertaining to the joint time-series properties of consumption and excess returns.

Original languageEnglish (US)
Pages (from-to)1265-1292
Number of pages28
JournalJournal of Finance
Volume67
Issue number4
DOIs
StatePublished - Aug 1 2012

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