Misalignments, returns and volatility in the equity market.

Summary The objective of this thesis is to empirically analyze misalignments in the U.S. stock market and to examine their impact on price dynamics, volatility and the conduct of monetary policy. The first chapter shows that the expected long-run risk premium is influenced by structural changes in the economy and not only by the course of the business cycle. In the second chapter, we show that temporary deviations in the long-run relationship between the earnings ratio and inflation have significant predictive power on future stock price movements. Chapter 3 examines the nature of the adjustment that takes place between stock prices and their fundamentals. Chapter 4 examines the impact of misalignments on the volatility of stock returns. Chapter 5 examines the relationship between household consumption, disaggregated wealth and monetary policy.