Trade Induced Productivity Change and Asset Prices

59 Pages Posted: 30 Aug 2016 Last revised: 13 May 2017

Ruchith Dissanayake

University of Alberta - School of Business, Department of Finance and Statistical Analysis, Students

Date Written: May 10, 2017

Abstract

This study uses financial data to measure trade induced productivity change and assess its effects on macroeconomic dynamics and equity returns. I find that trade induced productivity change leads to high marginal wealth states since, in short-run, economy reallocates resources from consumption towards exports and investment. Assets with high sensitivity to the shock have lower expected returns since they deliver high returns when consumption is dear for investors. The negative risk premium is stronger within larger firms and high investment firms. I also show that trade induced productivity contributes to economic growth, especially in the case of limited foreign import competition.

Keywords: factor model, asset pricing model, TMN returns, Trade Induced Productivity Change

JEL Classification: G12, F14, F65

Suggested Citation

Dissanayake, Ruchith, Trade Induced Productivity Change and Asset Prices (May 10, 2017). Available at SSRN: https://ssrn.com/abstract=2831046

Ruchith Dissanayake (Contact Author)

University of Alberta - School of Business, Department of Finance and Statistical Analysis, Students ( email )

2-24 Business Building
University of Alberta
Edmonton, Alberta T6G 2R6
Canada

HOME PAGE: http://www.ruchithdissanayake.com

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