In a model where a variable Y[sub t] is proportional to the present value, with constant discount rate, of expected future values of a variable y[sub t] the quot;spreadquot; S[sub t]= Y[sub t] - [theta sub t] will be stationary for some [theta] whether or not y[sub t]must be differenced to...

This paper reviews the behavior of financial asset prices in relation to consumption. The paper lists some important stylized facts that characterize US data, and relates them to recent developments in equilibrium asset pricing theory. Data from other countries are examined to see which features...

The permanent income hypothesis implies that people save because they rationally expect their labor income to decline; they save "for a rainy day". It follows that saving should be at least as good a predictor of declines in labor income as any other forecast that can be constructed from publicly...