Greenwald & Martin Lettau & Sydney C. Ludvigson, 2025. "How the Wealth Was Won: Factor Shares as Market Fundamentals," Journal of Political Economy, University of Chicago Press, vol. 133(4), pages 1083-1132.
How the Wealth Was Won: Factor Shares as Market Fundamentals
https://doi.org/10.1086/734089
Abstract
Why does the stock market rise and fall? From 1989 to 2017, the real per capita value of corporate equity increased at a 7.2% annual rate. We estimate that 40% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25% of the increase, followed by a lower risk price (21%) and lower interest rates (14%). The period 1952–88 experienced only one-third as much growth in market equity, but economic growth accounted for more than 100% of it.
How the Wealth Was Won: Factor Shares as Market Fundamentals
https://doi.org/10.1086/734089
Abstract
Why does the stock market rise and fall? From 1989 to 2017, the real per capita value of corporate equity increased at a 7.2% annual rate. We estimate that 40% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25% of the increase, followed by a lower risk price (21%) and lower interest rates (14%). The period 1952–88 experienced only one-third as much growth in market equity, but economic growth accounted for more than 100% of it.