Noise vs. News in Equity Returns

Distribution Risk and Equity Returns∗

In this paper we entertain the hypothesis that observed variations in income shares are the result of changes in the balance of power between workers and capital owners in labor relations. We show that this view implies that income share variations represent a risk factor of first-order importance for the owners of capital and, consequently, are a crucial determinant of the return to equity. Wh...

Investment Taxes and Equity Returns

This paper investigates whether investors are compensated for the tax burden of equity securities. Effective tax rates on equity securities vary over time due to frequent tax reforms and cross-sectionally due to persistent differences in propensities to pay dividends. The paper finds an economically and statistically significant relationship between risk-adjusted stock returns and effective per...

Equity, Efficiency and Increasing Returns

Do equity-linked certificates of deposit have equity-like returns?

In recent years, equity-linked certificates of deposit (ELCDs) have become widely available to investors as banks strive to remain competitive. Banks sell these instruments as having the safety of a traditional CD with potential market-like returns. However, valuing these instruments can be difficult because the terms vary and the returns depend upon future market conditions. This paper uses Mo...

The News in Financial Asset Returns

Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W First Quarter 2004 A re returns on financial markets useful for predicting the future course of the economy? It is widely thought that financial markets’ movements reflect the economy’s future and that finding the message in financial asset returns is one way to discern this future. The message is not always clear, though. For example,...