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The Declining Equity Premium: What Role Does Macroeconomic Risk Play?

Lettau, Martin et al.
NYU Faculty Digital Archive · Papers
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Aggregate stock prices, relative to virtually any indicator of fundamental value, soared to unprecedented levels in the 1990s. Even today, after the market declines since 2000, they remain well above historical norms. Why? We consider one particular explanation: a fall in macroeconomic risk, or the
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