NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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How the Wealth Was Won: Factors Shares as Market Fundamentals

Daniel L. Greenwald, Martin Lettau, Sydney C. Ludvigson

NBER Working Paper No. 25769
Issued in April 2019, Revised in May 2019
NBER Program(s):The Asset Pricing Program, The Economic Fluctuations and Growth Program, The Monetary Economics Program

We provide novel evidence on the driving forces behind the sharp increase in equity values over the post-war era. From the beginning of 1989 to the end of 2017, 23 trillion dollars of real equity wealth was created by the nonfinancial corporate sector. We estimate that 54% of this increase was attributable to a reallocation of rents to shareholders in a decelerating economy. Economic growth accounts for just 24%, followed by lower interest rates (11%) and a lower risk premium (11%). From 1952 to 1988 less than half as much wealth was created, but economic growth accounted for 92% of it.

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Document Object Identifier (DOI): 10.3386/w25769

 
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