Campbell, John Y., Giglio, Stefano and Polk, Christopher 
ORCID: 0009-0008-0133-6709
(2011)
Hard times.
AFA 2012 Chicago Meetings Paper.
SSRN.
Abstract
We show that the stock market downturns of 2000-2002 and 2007-2009 have very different proximate causes. The early 2000’s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000’s saw a decrease in rational expectations of future profits. We reach these conclusions using a VAR model of aggregate stock returns and valuations, estimated both freely and imposing the cross-sectional restrictions of the 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: | Monograph (Working Paper) |
|---|---|
| Official URL: | http://papers.ssrn.com/sol3/JELJOUR_Results.cfm?fo... |
| Additional Information: | © 2011 The authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HB Economic Theory 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: | 16 Apr 2012 11:09 |
| Last Modified: | 11 Sep 2025 04:28 |
| URI: | http://eprints.lse.ac.uk/id/eprint/43097 |
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