I explore the equilibrium value implications of economic models that incorporate reactions to a stochastic environment. I propose a dynamic value decomposition (DVD) designed to distinguish components of an underlying economic model that influence values over long horizons from components that...

This paper explores two perspectives on the rational expectations hypothesis. One perspective is that of economic agents in such a model, who form inferences about the future using probabilities implied by the model. The other is that of an econometrician who makes inferences about the...