TY  - JOUR
AU  - Gomes,Joao F.
AU  - Kogan,Leonid
AU  - Yogo,Motohiro
TI  - Durability of Output and Expected Stock Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12986
PY  - 2007
Y2  - March 2007
UR  - http://www.nber.org/papers/w12986
L1  - http://www.nber.org/papers/w12986.pdf
N1  - Author contact info:
Joao Gomes
University of Pennsylvania
Wharton School
Philadelphia, PA  19104
E-Mail: gomesj@wharton.upenn.edu

Leonid Kogan
MIT Sloan School of Management
100 Main Street, E62-636
Cambridge, MA  02142
Tel: 617/504-9728
Fax: 617/258-6855
E-Mail: lkogan@mit.edu

Motohiro Yogo
Federal Reserve Bank of Minneapolis
Research Department
90 Hennepin Avenue
Minneapolis, MN 55401-1804
Tel: 612/204-6476
E-Mail: yogo@minneapolisfed.org
AB  - The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flows and stock returns of durable-good producers are exposed to higher systematic risk. Using the benchmark input-output accounts of the National Income and Product Accounts, we construct portfolios of durable-good, nondurable-good, and service producers. In the cross-section, an investment strategy that is long on the durable-good portfolio and short on the service portfolio earns a risk premium exceeding 4 percent annually. In the time series, an investment strategy that is long on the durable-good portfolio and short on the market portfolio earns a countercyclical risk premium. We explain these findings in a general equilibrium asset-pricing model with endogenous production.
ER  -