Title: The Learning Premium

Abstract:  We find equilibrium stock prices and interest rates in a

representative-agent model with uncertain dividends’ growth, gradually

revealed by dividends themselves, where asset prices are rational –

reflect current information and anticipate the impact of future

knowledge on future prices. In addition to the usual premium for risk,

stock returns include a learning premium, which reflects the expected

change in prices from new information. In the long run, the learning

premium vanishes, as prices and interest rates converge to their

counterparts in the standard setting with known growth. The model

explains the increase in price-dividend ratios of the past century if

both relative risk aversion and elasticity of intertemporal

substitution are above one. This is a joint work with Paolo Guasoni.