Reportgreen1998

Approximate Equilibrium Asset Prices

50 citations0/0 files storedNational Bureau of Economic Research

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Stochastic processes and financial applications Economic theories and models

Abstract

Abstract. Arguing that total consumer wealth is unobservable, we invert the (approximate) con-sumption function to reconstruct, in a world with Kreps-Porteus generalized isoelastic preferences, (i) the wealth that supports the agents ’ observed consumption as an optimal outcome and (ii) the rate of return on the consumers ’ wealth portfolio. This allows us to (approximately) price assets solely as a function of their payoffs and of consumption—in both homoskedastic or heteroskedastic environments. We compare implied equilibrium returns on the wealth portfolio to observed stock market returns and gauge whether the stock market is a good proxy for unobserved aggregate wealth. JEL Classification: E21, G12 1.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 50 citations exist upstream.

Cited by

2007Chapter 61 Intertemporal Substitution and Risk Aversion 2007Intertemporal Substitution and Risk Aversion 2012An Intertemporal CAPM with Stochastic Volatility 2011Advances in Consumption-Based Asset Pricing: Empirical Tests 2002Can output explain the predictability and volatility of stock returns?2006Can Fundamentals Explain Cross-Country Correlations of Asset Returns?2009Understanding Inflation-Indexed Bond Markets

Imported from OpenAlex (CC0) — nothing here is generated.