Capital Share, Consumption Volatility and Long-run Redistribution Risks

Zong, Xiaoyu (2020): Capital Share, Consumption Volatility and Long-run Redistribution Risks.

Abstract

Capital return variability is a macroeconomic factor that exhibits significant explanatory power of long-run equity prices. In short-run, capital share risks create strong volatility effects on equity premium, as redistributive shocks that shift the share of income between the wealthy and the poor are not persistent. In long-run, capital return variability is positively correlated to stockholder consumption growth prospects and captures the long-term wealth redistribution trend. Exposure to capital return variability risks generates over a half of cross-sectional equity return variations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asset Pricing, Capital Share, Consumption Volatility, Recursive Utility, Long-run Risks.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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