Left Behind: Creative Destruction, Inequality, and the Stock Market
Name
704619.pdf
Description
Published version
Size
1.3 MB
Format
Adobe PDF
Checksum (MD5)
529d49ddf8c73cf9af73a82ebe949c7d
Author(s)
Kogan, Leonid
Papanikolaou, Dimitris
Stoffman, Noah
Date Issued
January 2020
Journal
Journal of Political Economy
Publisher
University of Chicago Press
Citation
Kogan, Leonid et al. "Left Behind: Creative Destruction, Inequality, and the Stock Market." Journal of Political Economy 128, 3 (March 2020): 855-906 © 2020 by The University of Chicago
Version
Final published version
Abstract
We develop a general equilibrium model of asset prices in which benefits of technological innovation are distributed asymmetrically. Financial market participants do not capture all economic gains from innovation even when they own shares in innovating firms. Such gains accrue partly to the innovators, who cannot sell claims on proceeds from their future ideas. We show how the resulting inequality among agents can give rise to a high risk premium on the aggregate stock market, return comovement and average return differences among firms, and the failure of traditional representative agent asset pricing models to account for cross-sectional differences in risk premia.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1086/704619
