We model investment options as intangible capital in a production economy in which younger vintages of assets in place have lower exposure to aggregate productivity risk. In equilibrium, physical capital requires a substantially higher expected return than intangible capital. Quantitatively, our model rationalizes a significant share of the observed difference in the average return of book-to-market-sorted portfolios (value premium). Our economy also produces (1) a high premium of the aggregate stock market over the risk-free interest rate, (2) a low and smooth risk-free interest rate, and (3) key features of the consumption and investment dynamics in the U.S. data.

Toward a quantitative general equilibrium asset pricing model with intangible capital

Croce, Mariano M.;Li, Kai
2013

Abstract

We model investment options as intangible capital in a production economy in which younger vintages of assets in place have lower exposure to aggregate productivity risk. In equilibrium, physical capital requires a substantially higher expected return than intangible capital. Quantitatively, our model rationalizes a significant share of the observed difference in the average return of book-to-market-sorted portfolios (value premium). Our economy also produces (1) a high premium of the aggregate stock market over the risk-free interest rate, (2) a low and smooth risk-free interest rate, and (3) key features of the consumption and investment dynamics in the U.S. data.
2013
2012
Ai, Hengjie; Croce, Mariano M.; Li, Kai
File in questo prodotto:
File Dimensione Formato  
RFS_2012b.pdf

non disponibili

Tipologia: Pdf editoriale (Publisher's layout)
Licenza: NON PUBBLICO - Accesso privato/ristretto
Dimensione 514.41 kB
Formato Adobe PDF
514.41 kB Adobe PDF   Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4011465
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 50
  • ???jsp.display-item.citation.isi??? 48
social impact