Hard Times

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Hard Times

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Title: Hard Times
Author: Campbell, John Y.; Giglio, Stefano; Polk, Christopher

Note: Order does not necessarily reflect citation order of authors.

Citation: Campbell, John Y., Stefano Giglio, and Christopher Polk. 2013. Hard Times. Review of Asset Pricing Studies 3, no. 1: 95–132.
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Abstract: We show that the stock market downturns of 2000–2002 and 2007–2009 have very different proximate causes. The early 2000s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000s saw a decrease in rational expectations of future profits. We reach these conclusions by using a VAR model of aggregate stock returns and valuations, estimated both without restrictions and imposing the cross-sectional restrictions of the intertemporal capital asset pricing model (ICAPM). Our findings imply that the 2007–2009 downturn was particularly serious for rational long-term investors, whose losses were not offset by improving stock return forecasts as in the previous recession. (JEL G12, N22)
Published Version: doi:10.3386/w16222
Other Sources: http://personal.lse.ac.uk/polk/research/hardtimes.pdf
http://scholar.harvard.edu/files/campbell/files/hardtimes20120827.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:12172786
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