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The equity premium and the business cycle: the role of demand and supply shocks

✍ Scribed by Peter N. Smith; Steffen Sorensen; Michael Wickens

Publisher
John Wiley and Sons
Year
2009
Tongue
English
Weight
303 KB
Volume
15
Category
Article
ISSN
1076-9307

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✦ Synopsis

Abstract

This paper explores the effects of the US business cycle on US stock market returns through an analysis of the equity risk premium. We propose a new methodology based on the SDF approach to asset pricing that allows us to uncover the different effects of aggregate demand and supply shocks. We find that negative shocks are more important that positive shocks, and that supply shocks have a much greater impact than demand shocks. Copyright Β© 2009 John Wiley & Sons, Ltd.

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