How the Wealth Was Won: Factors Shares as Market Fundamentals

77 Pages Posted: 22 Apr 2019 Last revised: 15 Jun 2022

See all articles by Daniel Greenwald

Daniel Greenwald

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Martin Lettau

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

Sydney C. Ludvigson

New York University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 2019

Abstract

Why do stocks rise and fall? From 1989 to 2017, the real per-capita value of corporate equity increased at a 7.5% annual rate. We estimate that 44% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25%, of the increase followed by a lower risk price (18%), and lower interest rates (14%). The period 1952 to 1988 experienced less than one third of the growth in market equity, but economic growth accounted for more than 100% of it.

Suggested Citation

Greenwald, Daniel and Lettau, Martin and Ludvigson, Sydney C., How the Wealth Was Won: Factors Shares as Market Fundamentals (April 2019). NBER Working Paper No. w25769, Available at SSRN: https://ssrn.com/abstract=3375822

Daniel Greenwald (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

Martin Lettau

University of California - Haas School of Business ( email )

Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
5106436349 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu/lettau/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sydney C. Ludvigson

New York University - Department of Economics ( email )

19 West 4th Street, 6th floor
New York, NY 10012
United States
212-998-8927 (Phone)
212-995-4186 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/ludvigsons/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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