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Rational Learning and the Term Structures of Value and Growth Risk Premia

Author

Listed:
  • Michael Hasler
  • Mariana Khapko
  • Roberto Marfè
Abstract
This paper studies the impact of information processing and rational learning about economic fundamentals on the level and timing of risk premium in the cross-section of firms. Learning helps explain the level of the value premium, and why the term structure of risk premium is increasing for value firms and decreasing for growth firms. Moreover, learning yields an upward-sloping term structure of interest rates and a downward-sloping term structure of market risk premium, whereas the full information economy predicts the opposite shapes. Therefore, rational learning helps understand the level and timing of expected returns observed in the cross-section of risky and risk-free assets.

Suggested Citation

  • Michael Hasler & Mariana Khapko & Roberto Marfè, 2020. "Rational Learning and the Term Structures of Value and Growth Risk Premia," Carlo Alberto Notebooks 622, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:622
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    File URL: https://www.carloalberto.org/wp-content/uploads/2020/12/no.622.pdf
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    References listed on IDEAS

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    Cited by:

    1. Matthijs Breugem & Stefano Colonnello & Roberto Marfè & Francesca Zucchi, 2020. "Dynamic Equity Slope," Carlo Alberto Notebooks 626, Collegio Carlo Alberto.
    2. Matthijs Breugem & Stefano Colonnello & Roberto Marfè & Francesca Zucchi, 2020. "Dynamic Equity Slope," Carlo Alberto Notebooks 626, Collegio Carlo Alberto.
      • Matthijs Breugem & Stefano Colonello & Roberto Marfè & Francesca Zucchi, 2020. "Dynamic Equity Slope," Working Papers 2020:21, Department of Economics, University of Venice "Ca' Foscari".

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    More about this item

    Keywords

    Asset Pricing; Rational Learning; Term Structures; Value and Growth Firms.;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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