VGSF - WU Vienna - LC

Tim A. Kroencke, University of Neuchâtel

online via Microsoft Teams Live Events 11:00 - 12:15

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Tim A. Kroencke from the Uni­versity of Neuchâtel to present his re­search pa­per.
Per­sonal Webpage

Pa­per

Re­ces­sions and the Stock Mar­ket

Why do stock prices fall more sharply than di­vidends around re­ces­sions? This pa­per provides an assess­ment of al­tern­at­ive po­ten­tial eco­nomic chan­nels sug­ges­ted in the lit­er­at­ure. One possible ex­plan­a­tion is that stock prices fall in anti­cip­a­tion of low fu­ture cash flows. I find that prices and cash flows drop con­tem­por­an­eously, which speaks against such a chan­nel. Al­tern­at­ively, prices drop be­cause ex­pec­ted re­turns are rising. I find that price volat­il­ity in­creases sub­stan­tially more than cash ow volat­il­ity dur­ing re­ces­sions, which sug­gests that changes in the price of risk play an im­port­ant role. These res­ults al­low for a fresh em­pir­ical assess­ment of com­pet­ing as­set pri­cing the­or­ies.



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