Affiliation:
1. Federal Reserve Board , United States
Abstract
Abstract
Changes in the propagation of shocks along firm networks are important to understanding aggregate and cross-sectional features of stock returns. When calibrated to match key characteristics of supplier–customer networks in the United States, a model in which firms are interlinked via enduring relationships generates long-run consumption risks, high and volatile risk premiums, and a small and stable risk-free rate. The model also matches cross-sectional patterns of portfolio returns sorted by firm centrality, a feature unaccounted for by standard asset pricing models. (JEL C67, E30, G12, L14)
Publisher
Oxford University Press (OUP)