General Properties of Rational Stock-Market Fluctuations

Mele, Antonio (March 2004) General Properties of Rational Stock-Market Fluctuations. IHS Economics Series 153

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Abstract or Table of Contents

Abstract: Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly general class of long-lived asset pricing models. These conditions solely affect the first primitives of the economy (probabilistic descriptions of the world, information structures, and preferences). They thus remove some of the arbitrariness related to the specification of theoretical models involving unobserved variables, state-dependent preferences, and incomplete markets.;

Item Type: IHS Series
Keywords: 'Pricing kernel restrictions' 'Convexity' 'Equilibrium volatility'
Classification Codes (e.g. JEL): D91, E44, G12
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 28 Jul 2017 00:54
URI: http://irihs.ihs.ac.at/id/eprint/1556

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