Guo, Hui; Savickas, Robert - Federal Reserve Bank of St. Louis - 2006
rate always leads an immediate
fall in stock prices,
,iDR
β must be negative in equation (1). Therefore,
22
,,iDR DRt
β … positive shock
to the discount rate leads stock prices to fall initially and to rise subsequently.
4
To address this
issue … the shock to expected future stock market returns. Stock prices fall if there
is a negative cash-flow shock or a positive …