Campbell, John Y., Giglio, Stefano and Polk, Christopher 
ORCID: 0009-0008-0133-6709
(2013)
Hard times.
Review of Asset Pricing Studies, 3 (1).
pp. 95-132.
ISSN 2045-9920
Abstract
We show that the stock market downturns of 2000–2002 and 2007–2009 have very different proximate causes. The early 2000s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000s saw a decrease in rational expectations of future profits. We reach these conclusions by using a VAR model of aggregate stock returns and valuations, estimated both without restrictions and imposing the cross-sectional restrictions of the intertemporal capital asset pricing model (ICAPM). Our findings imply that the 2007–2009 downturn was particularly serious for rational long-term investors, whose losses were not offset by improving stock return forecasts as in the previous recession.
| Item Type: | Article |
|---|---|
| Official URL: | http://raps.oxfordjournals.org/ |
| Additional Information: | © 2013 The Authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates N - Economic History > N2 - Financial Markets and Institutions > N22 - U.S.; Canada: 1913- |
| Date Deposited: | 15 Feb 2013 13:34 |
| Last Modified: | 06 Nov 2024 19:48 |
| URI: | http://eprints.lse.ac.uk/id/eprint/37403 |
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