Whelan, Karl (2006): Consumption and Expected Asset Returns without Assumptions About Unobservables.
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If asset returns are predictable, then rational expectations and the arithmetic of budget constraints together imply that these predictable changes in returns should affect current consumption. This paper presents a new framework linking consumption, income, and observable assets to expectations of future asset returns. Relative to previous work on this topic, the framework proposed in this paper has a number of advantages including not relying on untestable assumptions concerning unobservable variables and not requiring estimation of unknown parameters to arrive at a forecasting variable.
|Item Type:||MPRA Paper|
|Original Title:||Consumption and Expected Asset Returns without Assumptions About Unobservables|
|Keywords:||Asset Returns, Consumption|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Karl Whelan|
|Date Deposited:||23. Nov 2007 03:53|
|Last Modified:||12. Feb 2013 19:53|
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