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General properties of rational stock-market fluctuations

Mele, Antonio (2004) General properties of rational stock-market fluctuations. Discussion paper, 489. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Abstract

Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly general class of long-lived asset pricing models. These conditions solely affect the first primitives of the economy (probabilistic descriptions of the world, information structures, and preferences). They thus remove some of the arbitrariness related to the specification of theoretical models involving unobserved variables, state-dependent preferences, and incomplete markets.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2004 The Author
Library of Congress subject classification: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 489
Date Deposited: 05 Aug 2009 09:44
URL: http://eprints.lse.ac.uk/24701/

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