A linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates. This relation can be tested using vector...

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 "spread" 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 induce...

The consumption beta theorem of Breeden makes the expected return on any asset a function only of its covariance with changes in aggregate consumption. It is shown that the theorem is more robust than was indicated by Breeden. The theorem obtains even if one deletes Breeden's assumptions that...

The most familiar interpretation for the large and unpredictable swings that characterize common stock price indices is that price changes represent the efficient discounting of "new information" It is remarkable given the popularity of this interpretation that it has never been established what...

Social security system old age insurance systems are devices for the sharing of income risks of elderly people with others. Risks can be shared intergenerationally (with the young of the same country), intragenerationally (with other elderly of the same country), or internationally (with...

Estimates are made, from time series data on real gross domestic products, of the standard deviations of returns in markets for perpetual claims on countries' incomes. The results indicate that the variability of returns is of a magnitude comparable to that of returns in stock markets. Evidence...

Real stock prices seem to overreact to changes in long-term interest rates. That is, real stock prices drop when long-term interest rates rise (and rise when they fall) more than would be implied by a rational expectations present value model where expectations are based on a vector...