Slow-Moving Capital and Stock Returns

48 Pages Posted: 1 May 2014 Last revised: 7 Jun 2019

See all articles by Sergey Isaenko

Sergey Isaenko

Concordia University, Quebec - Department of Finance

Date Written: April 2019

Abstract

This paper studies the effects that delays in capital allocations in the stock market and high short-term trading incentives have on returns of this market. We report that capital inertia makes the Sharpe ratio and the volatility of the stock returns many times higher than in an economy with no capital delays. Furthermore, in agreement with empirical literature, the stock price displays short-term overreaction and high volatility of the conditional Sharpe ratio.

Keywords: General Equilibrium; Asset Pricing; Risk Premium Puzzle; Slow Capital Movement

JEL Classification: G11, G12

Suggested Citation

Isaenko, Sergey, Slow-Moving Capital and Stock Returns (April 2019). Available at SSRN: https://ssrn.com/abstract=2430352 or http://dx.doi.org/10.2139/ssrn.2430352

Sergey Isaenko (Contact Author)

Concordia University, Quebec - Department of Finance ( email )

John Molson School of Business
Concordia University. 1455 de Maisonneuve Blvd.W.
Montreal, Quebec, H3G 1M8
Canada
1-514-848-2424 ext.2797 (Phone)
1-514-848-4500 (Fax)

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