John C. Heaton on Measuring Long-Run Risk
1,461 views · Published 4 April 2012 · 4:39 · Indexed 20 October 2026
Channel: The University of Chicago · 2012 · Education
John C. Heaton, professor of Finance at the University of Chicago Booth School of Business, discusses what happens when "consumption strikes back" and how fundamental economic variables regain importance in explaining risk premiums in stock markets. He also discusses how a decline in the stock market today may reflect an underlying shock to the economy that will not dissipate quickly and will have an impact over a long horizon. Stocks that closely follow business cycles are considered riskier, because they will typically fall at the first hint of a downturn and rise faster as the economy recovers. From the investors' perspective, stocks of companies whose earnings are most affected by economic conditions should promise a bigger return. Many people then believe that an economic recession goes hand in hand with a bear market. However, Heaton says this often has not been true in the past, and value stocks, those with low market values relative to the fundamental factors that determine their price, have had consistently higher returns than growth stocks, those whose earnings are expected to grow rapidly. For more information, visit http://www.chicagobooth.edu/capideas/may-2012/heaton.aspx. ➡ Subscribe: http://bit.ly/UCHICAGOytSubscribe About #UChicago: Since its founding in 1890, the University of Chicago has been a destination for rigorous inquiry and field-defining research. This transformative academic experience empowers students and scholars to challenge conventional thinking in pursuit of original ideas. #UChicago on the Web: Home: http://bit.ly/UCHICAGO-homepage News: http://bit.ly/UCHICAGO-news Facebook: http://bit.ly/UCHICAGO-FB Twitter: http://bit.ly/UCHICAGO-TW Instagram: http://bit.ly/UCHICAGO-IG University of Chicago on YouTube: https://www.youtube.com/uchicago *** ACCESSIBILITY: If you experience any technical difficulties with this video or would like to make an accessibility-related request, please email [email protected].
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