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Bergeron, Claude (2019). Recursive preferences, long-run risks, and stock valuation. Economics Bulletin, 39 (2), 996-1004.
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Content : Published Version |
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| Item Type: | Journal Articles |
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| Refereed: | Yes |
| Status: | Published |
| Abstract: | In this note, we develop a stock valuation model with recursive preferences and long-run risks. The model is based on the Epstein and Zin (1989, 1991) and Weil (1989) recursive utility framework. Our main result indicates that the intrinsic value of a stock is negatively related to (i) the long-run covariance between dividends and aggregate consumption, and (ii) the long-run covariance between dividends and market returns. This theoretical finding suggests that the sensitivity of dividends to market returns and aggregate consumption affects the long-run risk of a firm and its equity value. |
| Official URL: | http://www.accessecon.com/pubs/eb/default.aspx?pag... |
| Depositor: | Bergeron, Claude |
| Owner / Manager: | Claude Bergeron |
| Deposited: | 08 May 2019 13:31 |
| Last Modified: | 08 May 2019 13:31 |
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