Investor Information, Long-Run Risk, and the Duration of Risky Cash Flows
We study the role of information in asset pricing models with long-run cash flow risk. To illustrate the importance of the information structure, we show how the implications of the long-run risk paradigm for the cross-sectional properties of stock returns and cash flow duration are affected by information. When investors can fully distinguish short- and long- run consumption risk components of dividend growth innovations (full information), only exposure to long-run consumption risk generates signi.cant risk premia, implying that high- return value stocks are long-duration assets, contrary to the historical data. By contrast, when investors observe the change in consumption and dividends each period but not the individual components of that change (limited information), exposure to short-run risk can generate large risk premia, so that high-return value stocks are short-duration assets while low-return growth stocks are long-duration assets, as in the data. We also show that, in order to explain empirical finding that long-horizon equity is less risky than short-horizon equity, the properties of the cash flow model and the values of primitive preference parameters must be quite different from those emphasized in the existing long-run risk literature.
Mariano M. Croce Martin Lettau Sydney C. Ludvigson
Department of Economics,New York University,269 Mercer Street,7th Floor,New York,NY 10003 Department of Finance,Stern School of Business,New York University,44 West Fourth Street,New York,NY
国际会议
大连
英文
1-59
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）