New paper examines household production and asset prices | News | Notre Dame News | University of Notre Dame Skip To Content Skip To Navigation Skip To Search University of Notre Dame Notre Dame News Experts ND in the News Subscribe About Us Home Contact Search Menu Home › News › New paper examines household production and asset prices New paper examines household production and asset prices Published: March 20, 2015 Author: William G. Gilroy Zhi Da A new paper by Zhi Da, Viola D. Hank Associate Professor of Finance at the University of Notre Dame, finds that residential electricity usage can track household production in real time and helps to price assets. “The importance of household production in economics has been recognized by Nobel Laureate Gary Becker back in 1960s, but measuring what household produces at home has been an empirical challenge,” Da said. “For example, it has been a puzzle why certain industries such as consumer products, food and clothing earn higher average returns than others such as steel and fabricated products. Our research shows that consumer product-related industries are risky since they have high exposure to household production risk.” In addition to its contribution to economic theory, the research can potentially prove useful for investors. “Investors can better compute the expected return on a stock or the cost of capital for a firm by taking into consideration the household production risk,” Da said. “We find that average investors dislike times when the household production is low. Therefore, stocks or projects with low payoff in those times are more risky and would require higher expected return.” The new paper is Zhi Da’s latest effort to use electricity usage to examine finance and economics. “I found in another paper that the growth rate in industrial electricity usage negatively predicts next-one year stock market return,” he said. “For example, if the industrial electricity usage this month is 1 percent lower than that in the same month last year, we predict the stock market return to be 0.92 percent higher in the next year.” The new study appears in the journal Management Science. Contact: Zhi Da, 574-631-0354, zda@nd.edu Posted In: Diversity, Equity & Inclusion Research Home Experts ND in the News Subscribe About Us Related September 12, 2022 Can you tell me how to get to Sesame Street … in different countries? September 12, 2022 Hurricane Harvey’s hardest hit survivors five times as likely to experience anxiety from COVID-19 pandemic August 29, 2022 Gender-diverse teams produce more novel, higher-impact scientific discoveries, study shows August 23, 2022 In race against hurricane season, engineers launch survey to study incentives for climate-resilient homes August 16, 2022 Early childhood lead exposure, exacerbated by structural racism, results in lower reading scores For the Media Contact Office of Public Affairs and Communications Notre Dame News 500 Grace Hall Notre Dame, IN 46556 USA Facebook Twitter Instagram YouTube Pinterest © 2022 University of Notre Dame Search Mobile App News Events Visit Accessibility Facebook Twitter Instagram YouTube LinkedIn