Nominal Rigidities and Asset Pricing
95 Pages Posted: 12 Aug 2014 Last revised: 10 May 2017
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Nominal Rigidities and Asset Pricing
Date Written: March 27, 2015
Abstract
This paper examines the asset pricing implications of nominal rigidities. Firms that adjust their product prices infrequently earn a return premium of 4% per year. Merging unique product-price data at the firm level with stock returns, I document that the premium for sticky-price firms is a robust feature of the data and varies substantially over the business cycle. The premium is not driven by other firm and industry characteristics. Differential exposure to systematic risk fully explains the premium for sticky-price firms.
Keywords: Sticky Prices, Stock Returns, Monetary Policy
JEL Classification: E12, E44, E52, G12
Suggested Citation: Suggested Citation
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