Equilibrium prices or quantities in very broad classes of models depend on iterated expectations of an autoregressive forcing variable. Examples of this dependence include that of stock prices on autoregressive dividends, that of the price level or exchange rate on an autoregressive money...

Dramatic fluctuations in the stock market raise questions about whether actual prices correspond to fundamentals. Even if there are "bubbles", they may not distort real behaviour if managers base investment decisions on fundamentals. Using a new specification testing strategy based on combining...