Matsumoto, Akito; Cova, Pietro; Pisani, Massimiliano; … - In: Journal of Economic Dynamics and Control 35 (2011) 12, pp. 2132-2149
We study equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1988) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. We show that introducing news...