The Demographics of Innovation and Asset Returns / Nicolae Gârleanu, Leonid Kogan, Stavros Panageas.

Format:

Book

Author/Creator:

Gârleanu, Nicolae.

Contributor:

National Bureau of Economic Research.

Kogan, Leonid.

Panageas, Stavros.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15457.

NBER working paper series no. w15457

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of inter-generational risk sharing, innovation creates a systematic risk factor, which we call "displacement risk.'' This risk helps explain several empirical patterns, including the existence of the growth-value factor in returns, the value premium, and the high equity premium. We assess the magnitude of displacement risk using estimates of inter-cohort consumption differences across households and find support for the model.

Notes:

Print version record

October 2009.