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We find evidence of infrequent shifts, or "regimes," in the mean of the asset valuation variable <i>cay<sub>t</sub></i> that are strongly associated with low-frequency fluctuations in the real federal funds rate, with low policy rates associated with high asset valuations, and vice versa. There is no evidence...
Persistent link: https://www.econbiz.de/10012456107
Three mutually uncorrelated economic disturbances that we measure empirically explain 85% of the quarterly variation in real stock market wealth since 1952. A model is employed to interpret these disturbances in terms of three latent primitive shocks. In the short run, shocks that affect the...
Persistent link: https://www.econbiz.de/10012458846