Capital Share Risk in U.S. Asset Pricing

Martin Lettau, Sydney Ludvigson, Sai Ma

    Research output: Contribution to journalArticle

    Abstract

    A single macroeconomic factor based on growth in the capital share of aggregate income exhibits significant explanatory power for expected returns across a range of equity characteristic portfolios and nonequity asset classes, with risk price estimates that are of the same sign and similar in magnitude. Positive exposure to capital share risk earns a positive risk premium, commensurate with recent asset pricing models in which redistributive shocks shift the share of income between the wealthy, who finance consumption primarily out of asset ownership, and workers, who finance consumption primarily out of wages and salaries.

    Original languageEnglish (US)
    JournalJournal of Finance
    DOIs
    StatePublished - Jan 1 2019

    Fingerprint

    Finance
    Asset pricing
    Assets
    Income
    Macroeconomic factors
    Ownership
    Asset pricing models
    Wages
    Workers
    Price risk
    Expected returns
    Equity
    Risk premium

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

    Cite this

    Capital Share Risk in U.S. Asset Pricing. / Lettau, Martin; Ludvigson, Sydney; Ma, Sai.

    In: Journal of Finance, 01.01.2019.

    Research output: Contribution to journalArticle

    Lettau, Martin ; Ludvigson, Sydney ; Ma, Sai. / Capital Share Risk in U.S. Asset Pricing. In: Journal of Finance. 2019.
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