A Theory and Evidence on Technology, Value Premium, and Volatility
101 Pages Posted: 30 Jan 2007 Last revised: 30 Apr 2015
Date Written: April 29, 2015
We provide a simple but fairly general theoretical model that produces many of the implications regarding the value premium and stock volatility suggested in prior empirical literature and provides a number of new implications. Our equilibrium model naturally incorporates technological efficiency and innovations as a driver of many of the known effects. We also perform simple empirical tests of our model’s new implications.
Keywords: asset productivity, asset liquidity, value premium, growth stocks, ﬁrm volatility, noise, ICAPM, elasticity of expectations
JEL Classification: G12
Suggested Citation: Suggested Citation