TY  - JOUR
AU  - Gârleanu,Nicolae
AU  - Kogan,Leonid
AU  - Panageas,Stavros
TI  - The Demographics of Innovation and Asset Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15457
PY  - 2009
Y2  - October 2009
UR  - http://www.nber.org/papers/w15457
L1  - http://www.nber.org/papers/w15457.pdf
N1  - Author contact info:
Nicolae B. Garleanu
Haas School of Business
F628
University of California, Berkeley
Berkeley, CA 94720
Tel: (1) 510 642 3421
Fax: (1) 510 643 1420
E-Mail: garleanu@haas.berkeley.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

Stavros Panageas
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL, 60637
Tel: (773) 834 4711
E-Mail: stavros.panageas@chicagobooth.edu
AB  - We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of inter-generational risk sharing, innovation creates a systematic risk factor, which we call "displacement risk.'' This risk helps explain several empirical patterns, including the existence of the growth-value factor in returns, the value premium, and the high equity premium. We assess the magnitude of displacement risk using estimates of inter-cohort consumption differences across households and find support for the model.
ER  -