NDLI: Stock Price Cycles and Business Cycles

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Stock Price Cycles and Business Cycles

Content Provider	Scilit
Author	Adam, Klaus Merkel, Sebastian
Copyright Year	2018
Description	Journal: SSRN Electronic Journal We present a unified and quantitatively credible explanation for the joint behavior of stock prices and business cycles. We consider a frictionless production economy with time-separable consumption preferences and perfectly áexible labor supply. Investors extrapolate past stock price gains but are rational otherwise. The model replicates a standard set of asset pricing and business cycle moments, as well as moments capturing the interaction between business cycles and stock prices. The model generates belief-driven stock price booms that are associated with a corresponding boom in hours worked and investment. Once the boom turns into a bust, output, hours and investment remain persistently depressed. The model predicts that 75% of the observed áuctuations in the price-dividend ratio and 13% of observed output áuctuations are attributable to subjective price extrapolation by investors.
Related Links	https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2316~4effe6153e.en.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3329820
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3329820
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2018-01-01
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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