Conference Agenda
Please note that all times are shown in the time zone of the conference. The current conference time is: 2nd June 2024, 08:34:58pm CEST
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Session Overview |
Session | |||
NBIM: Understanding the long-run drivers of asset prices
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Presentations | |||
ID: 883
Stagflationary Stock Returns and the Role of Market Power Federal Reserve Board, United States of America We study the inflation implications for firms across the market power distribution from an asset pricing perspective. Inflationary surprises are associated with persistent declines in stock returns. We propose a new decomposition of the present value identity of stock prices and show that investors expect nominal cashflows to remain stagnant during periods of higher-than-expected inflation, a stagflationary view of the world, on average, while a rising equity risk premium reduces stock prices. Real yields do not increase in response to inflationary news, inconsistent with a Taylor-rule type monetary policy-driven stock price response. Firms with a large degree of market power are shielded from the negative returns following inflation surprises, as market power firms are expected to generate a relative increase in their nominal cashflows in response to inflation shocks. Changes in analysts’ firm-level earnings expectations around inflationary surprises confirm these results.
ID: 920
Innovation-Driven Contractions: A Key to Unravel Asset Pricing Puzzles 1University of North Carolina at Chapel Hill, United States of America; 2Chinese University of Hong Kong We examine a perplexing phenomenon wherein technological innovations induce short-term contractions, using a two-sector New-Keynesian model. Pivotal to explaining the evidence are sticky prices, which alter the cyclicality of relative prices, impacting production during innovative phases. The model addresses key asset-pricing questions: Why is there a negative link between investment returns and stock returns? Why do valuations surge post adverse labor-market events? Why do both high book-to-market and high gross-profits forecast future returns positively, despite their divergent ties to technology? Why is the slope of the equity yield term structure procyclical? The mechanism of innovation-led contractions serves as a unifying thread, weaving together previously isolated puzzles, while offering a novel perspective.
ID: 2071
More factors matter and factors matter more than you might think: The role of time variation in factor premia 1Arizona State University; 2University of Oklahoma; 3University of Washington The literature has asserted that as few as four or five factor principal components (PCs) are sufficient to largely explain the cross-section of stock returns. By allowing for time variation in factor premia, we show that portfolios formed from factor PCs yield economically large out-of-sample Sharpe ratios that increase as up to forty PCs are employed. That is, non-latent time-varying factors have strong predictive power for the cross-section of stock returns, and to a substantial extent are not redundant of each other. Time variation in the number of economically relevant factors is related to changes in economic conditions and the diversity of firm characteristics, indicating roles for economic complexity and investor learning.
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