Bidian, Florin
[Verfasser:in]
;
Subramanian, Ajay
[Sonstige Person, Familie und Körperschaft];
Yang, Baozhong
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 3, 2020 erstellt
Beschreibung:
We show how product variety affects asset prices in a general-equilibrium model. We analytically characterize the unique equilibrium and estimate the model to match asset pricing and product market moments. The equity premium and risk-free rate can be reconciled for risk aversion levels around 4 and quarterly discount factors exceeding 0.99. Our model generates new implications for how product market characteristics influence asset prices. The market risk premium decreases with the average intrasector product substitutability but increases with the intersector product substitutability. We show empirical support for the novel cross-sectional prediction that industry excess returns increase with product substitutabilities