Technological Growth and Asset Pricing

58 Pages Posted: 15 Sep 2009 Last revised: 2 Dec 2022

See all articles by Nicolae Garleanu

Nicolae Garleanu

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stavros Panageas

University of California, Los Angeles (UCLA) - Finance Area; National Bureau of Economic Research (NBER)

Jianfeng Yu

Tsinghua University - PBC School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 2009

Abstract

In this paper we study the implications of general-purpose technological growth for asset prices. The model features two types of shocks: "small", frequent, and disembodied shocks to productivity and "large" technological innovations, which are embodied into new vintages of the capital stock. While the former affect the economy on impact, the latter affect the economy with lags, since firms need to first adopt the new technologies through investment. The process of adoption leads to cycles in asset valuations and risk premia as firms convert the growth options associated with the new technologies into assets in place. This process can help provide a unified, investment-based view of some well documented phenomena such as the asset-valuation patterns around major technological innovations, the countercyclical behavior of returns, the lead-lag relationship between the stock market and output, and the increasing patterns of consumption-return correlations over longer horizons.

Suggested Citation

Garleanu, Nicolae Bogdan and Panageas, Stavros and Yu, Jianfeng, Technological Growth and Asset Pricing (September 2009). NBER Working Paper No. w15340, Available at SSRN: https://ssrn.com/abstract=1472278

Nicolae Bogdan Garleanu (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Stavros Panageas

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
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National Bureau of Economic Research (NBER) ( email )

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Jianfeng Yu

Tsinghua University - PBC School of Finance ( email )

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Haidian District
Beijing 100083
China

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