Discount Rate Dynamics and Stock Prices

52 Pages Posted: 9 Oct 2013 Last revised: 12 Aug 2020

Date Written: October 4, 2013

Abstract

Basic volatility and predictability characteristics of the aggregate US stock market over the last century can be understood in terms of the dynamic properties of mean reverting equity discount rates. Additionally, high prices in good times and low prices in bad times can be understood in terms of the dynamics of both equity discount rates and return on capital, and the negative correlation between them.

Keywords: asset pricing, predictability of stock returns, volatility of stock returns, dividend growth predictability, discount rates

JEL Classification: G12

Suggested Citation

Tarlie, Martin, Discount Rate Dynamics and Stock Prices (October 4, 2013). Available at SSRN: https://ssrn.com/abstract=2337155 or http://dx.doi.org/10.2139/ssrn.2337155

Martin Tarlie (Contact Author)

GMO ( email )

United States
617-790-5072 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
569
Abstract Views
2,110
Rank
94,479
PlumX Metrics