Although it has been well established that financial volatility is related to news and macroeconomic shocks, there has been less emphasis on the importance of underlying economic and political stability. In this paper we study the behavior of consol returns since 1729 and identify a...

This paper finds that the majority of stock price movements remain unexplained after controlling for both public and private information. This suggests that economists' inability to explain asset price movements is the result of either noise or naive asset pricing models.