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How the Wealth Was Won: Factor Shares as Market Fundamentals

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  • Daniel L. Greenwald
  • Martin Lettau
  • Sydney C. Ludvigson

Abstract

Why does the stock market rise and fall? From 1989 to 2017, the real per capita value of corporate equity increased at a 7.2% annual rate. We estimate that 40% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25% of the increase, followed by a lower risk price (21%) and lower interest rates (14%). The period 1952–88 experienced only one-third as much growth in market equity, but economic growth accounted for more than 100% of it.

Suggested Citation

  • Daniel L. Greenwald & Martin Lettau & Sydney C. Ludvigson, 2025. "How the Wealth Was Won: Factor Shares as Market Fundamentals," Journal of Political Economy, University of Chicago Press, vol. 133(4), pages 1083-1132.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/734089
    DOI: 10.1086/734089
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