Investor risk premia and real macroeconomic fluctuations

  title={Investor risk premia and real macroeconomic fluctuations},
  author={Michael F{\"u}rst},
Abstract The premium for risk should have a significant impact on real economic activity: basic finance teaches corporate managers to evaluate new investment opportunities based on a risk-adjusted cost of capital. Moreover, many asset pricing models show this premium should vary with economic conditions. Firms seeking to invest in the midst of a recession when the premium for risk is high, for example, must offer a higher rate of return on new investments. By inducing changes in investment, the… CONTINUE READING