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| Author: | Balvers, R.J. Huang, D. |
| Title: | Productivity-based asset pricing: theory and evidence |
| Journal: | Journal of Financial Economics
2007 : NOV, VOL. 86:2, p. 405-445 |
| Index terms: | asset valuation pricing productivity |
| Language: | eng |
| Abstract: | In a general real business cycle model, a pricing kernel is derived that involves only production function arguments. The productivity shock is the single factor and the capital stock relative to a productivity measure is the conditioning variable. The model compares favorably with the complementary consumption-based and market-based approaches and with the Fama-French three-factor model. A size premium arises from differences in unconditional sensitivitiessmall firms are more sensitive to productivity shocksand a value premium from differences in conditional sensitivities to productivity shocksgrowth firms are more sensitive to productivity shocks when the productivity risk premium is low. |
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