Investment Shocks and Asset Prices

Papanikolaou, Dimitris

doi:10.1086/662221

Cited by 242 publications

(117 citation statements)

References 41 publications

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“…Panel A of Table replicates the findings of Papanikolaou (), who shows that sorting firms into portfolios based on IMC betas results in a declining pattern of average returns. However, as we see in the fourth row of Table , there is a strongly increasing pattern in market betas.…”

Section: Empirical Implicationssupporting

confidence: 78%

“…The price of risk of the IST shock

γ_{z}

depends on preferences. In the models of Papanikolaou () and Kogan, Papanikolaou, and Stoffman (), states with low cost of new capital (high z ) are high marginal valuation states, which is analogous to a negative value of

γ_{z}

…”

Section: The Modelmentioning

confidence: 99%

“…We then match firms to industries according to their NAICS codes. Gomes, Kogan, and Yogo (2009) and Papanikolaou (2011) describe the details of this classification procedure.…”

Section: A1 Investment-specific Shocksmentioning

confidence: 99%

“…IMC portfolio. We follow Gomes, Kogan, and Yogo (2009) and Papanikolaou (2011) and classify firms as investment or consumption producers based on the NIPA tables. We classify industries based on the sector to which they contribute the most value.…”

Section: A4 Portfolio Constructionmentioning

confidence: 99%

“…In Papanikolaou (), households attach higher marginal valuations to states with a positive IST shock because, in those states, households substitute resources away from consumption and into investment. In Kogan, Papanikolaou, and Stoffman (), future generations capture the rents from capital embodied shocks, while existing households are displaced.…”

mentioning

confidence: 99%

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Growth Opportunities, Technology Shocks, and Asset Prices

Kogan

Papanikolaou²

2014

The Journal of Finance

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230

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We explore the impact of investment-specific technology (IST) shocks on the crosssection of stock returns. IST shocks reflect technological advances embodied in new capital goods. Using a structural model, we show that IST shocks have a differential effect on the two fundamental components of firm value, the value of assets in place and the value of growth opportunities. This differential sensitivity to IST shocks has two main implications. First, risk premia on firms with abundant growth opportunities are different from those on firms with limited growth opportunities. Second, firms with similar levels of growth opportunities comove with each other, giving rise to the value factor in stock returns. Our model replicates the failure of the conditional CAPM to capture the value premium. Our empirical tests confirm the model's predictions for asset returns and investment rates.

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Section: Empirical Implicationssupporting

confidence: 78%

“…The price of risk of the IST shock

γ_{z}

γ_{z}

…”

Section: The Modelmentioning

confidence: 99%

“…We then match firms to industries according to their NAICS codes. Gomes, Kogan, and Yogo (2009) and Papanikolaou (2011) describe the details of this classification procedure.…”

Section: A1 Investment-specific Shocksmentioning

confidence: 99%

Section: A4 Portfolio Constructionmentioning

confidence: 99%

mentioning

confidence: 99%

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Growth Opportunities, Technology Shocks, and Asset Prices

Kogan

Papanikolaou²

2014

The Journal of Finance

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230

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Technology trade with asymmetric tax regimes and heterogeneous labour markets: Implications for macro quantities and asset prices

2020

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The international diffusion of technology plays a key role in stimulating global growth and explaining co-movements of international equity returns. Existing empirical evidence suggests that countries are heterogeneous in their attitude towards innovation: Some countries rely more on technology adoption while other countries rely more on internal technology production. European countries that rely more on adoption are also typically characterized by lower fiscal policy flexibility and higher labour market rigidity. We develop a two-country model, in which both countries rely on R&D and adoption, to study the shortand long-run effects of aggregate technology and adoption probability shocks on economic growth in the presence of the aforementioned asymmetries. Our framework suggests that an increase in the ability to adopt technology from abroad stimulates future economic growth in the country that benefits from higher adoption rates but the beneficial effects also spread to the foreign country. Moreover, heterogeneity helps to explain the differences in macro quantities and equity returns observed in the international data.

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