Chapter 19 Asset prices, consumption, and the business cycle

Handbook of Macroeconomics

Volumn 1, Issue PART C, 1999, Pages 1231-1303

  Campbell, John Y ^a  

^a HARVARD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77956771554     PISSN: 15740048     EISSN: None     Source Type: Book Series    
DOI: 10.1016/S1574-0048(99)10032-6     Document Type: Review

References (125)

1. Abel A.B. Asset prices under habit formation and catching up with the Joneses. American Economic Review Papers and Proceedings 80 (1990) 38-42
2. Abel A.B. Exact solutions for expected rates of return under Markov regime switching: implications for the equity premium puzzle. Journal of Money, Credit and Banking 26 (1994) 345-361
3. Abel A.B. Risk premia and term premia in general equilibrium. Journal of Monetary Economics 43 (1999) 3-33
4. Abel A.B., Mankiw N.G., Summers L.H., and Zeckhauser R.J. Assessing dynamic efficiency: theory and evidence. Review of Economic Studies 56 (1989) 1-20
5. Aiyagari S.R., and Gertler M. Overreaction of asset prices in general equilibrium. Working Paper No. 6747 (1998), NBER
6. Atkeson A., and Phelan C. Reconsidering the costs of business cycles with incomplete markets. In: Fischer S., and Rotemberg J.J. (Eds). NBER Macroeconomics Annual 1994 (1994), MIT Press 187-207
7. Attanasio O.P., and Weber G. Consumption growth, the interest rate, and aggregation. Review of Economic Studies 60 (1993) 631-649
8. unpublished paper. Backus D. Cox-Ingersoll-Ross in discrete time (1993), New York University, Cambridge, MA
9. Bansal R., and Coleman II W.J. A monetary explanation of the equity premium, term premium, and risk-free rate puzzles. Journal of Political Economy 104 (1996) 1135-1171
10. Barberis N., Shleifer A., and Vishny R.W. A model of investor sentiment. Journal of Financial Economics 49 (1998) 307-343
11. (London). Barclays de Zoete Wedd Securities. The BZW Equity-Gilt Study: Investment in the London Stock Market since 1918 (1995)
12. Barsky R.B., and DeLong J.B. Why does the stock market fluctuate?. Quarterly Journal of Economics 107 (1993) 291-311
13. Baxter M., and Crucini M.J. Explaining saving-investment correlations. American Economic Review 83 (1993) 416-436
14. Beaudry P., and van Wincoop E. The intertemporal elasticity of substitution: an exploration using a US panel of state data. Economica 63 (1996) 495-512
15. Bekaert G., Hodrick R.J., and Marshall D.A. 'Peso problem' explanations for term structure anomalies. Working Paper No. 6147 (1997), NBER
16. Benartzi S., and Thaler R.H. Myopic loss aversion and the equity premium puzzle. Quarterly Journal of Economics 110 (1995) 73-92
17. Black F. Studies of stock price volatility changes. Proceedings of the 1976 Meetings of the Business and Economic Statistics Section (1976), American Statistical Association 177-181
18. Blanchard O.J., and Watson M.W. Bubbles, rational expectations, and financial markets. In: Wachtel P. (Ed). Crises in the Economic and Financial Structure: Bubbles, Bursts, and Shocks (1982), Lexington Publishers
19. Boldrin M., Christiano L.J., and Fisher J. Asset pricing lessons for modeling business cycles. Working Paper No. 5262 (1995), NBER, Lexington, MA
20. Bollerslev T., Engle R., and Wooldridge J. A capital asset pricing model with time varying covariances. Journal of Political Economy 96 (1988) 116-131
21. Bollerslev T., Chou R.Y., and Kroner K.F. ARCH modeling in finance: a review of the theory and empirical evidence. Journal of Econometrics 52 (1992) 5-59
22. unpublished paper. Brav A., and Geczy C.C. An empirical resurrection of the simple consumption CAPM with power utility (1996), University of Chicago
23. Breeden D. An intertemporal asset pricing model with stochastic consumption and investment opportunities. Journal of Financial Economics 7 (1979) 265-296
24. Brown S., Goetzmann W., and Ross S. Survival. Journal of Finance 50 (1995) 853-873
25. Campbell J.Y. Bond and stock returns in a simple exchange model. Quarterly Journal of Economics 101 (1986) 785-804
26. Campbell J.Y. Stock returns and the term structure. Journal of Financial Economics 18 (1987) 373-399
27. Campbell J.Y. A variance decomposition for stock returns. Economic Journal 101 (1991) 157-179
28. Campbell J.Y. Intertemporal asset pricing without consumption data. American Economic Review 83 (1993) 487-512
29. Campbell J.Y. Consumption and the stock market: interpreting international experience. Swedish Economic Policy Review 3 (1996) 251-299
30. Campbell J.Y. Understanding risk and return. Journal of Political Economy 104 (1996) 298-345
31. Campbell J.Y., and Cochrane J.H. By force of habit: a consumption-based explanation of aggregate stock market behavior. Journal of Political Economy 107 (1999) 205-251
32. Campbell J.Y., and Kyle A.S. Smart money, noise trading, and stock price behavior. Review of Economic Studies 60 (1993) 1-34
33. Campbell J.Y., and Mankiw N.G. Consumption, income, and interest rates: reinterpreting the time series evidence. In: Blanchard O.J., and Fischer S. (Eds). National Bureau of Economic Research Macroeconomics Annual 4 (1989) 185-216
34. Campbell J.Y., and Mankiw N.G. The response of consumption to income: a cross-country investigation. European Economic Review 35 (1991) 723-767
35. Campbell J.Y., and Shiller R.J. The dividend-price ratio and expectations of future dividends and discount factors. Review of Financial Studies 1 (1988) 195-227
36. Campbell J.Y., and Shiller R.J. Yield spreads and interest rate movements: a bird's eye view. Review of Economic Studies 58 (1991) 495-514
37. Campbell J.Y., Lo A.W., and MacKinlay A.C. The Econometrics of Financial Markets (1997), Princeton University Press
38. Carroll C.D. The buffer-stock theory of saving: some macroeconomic evidence. Brookings Papers on Economic Activity 1992 2 (1992) 61-156
39. Cecchetti S.G., Lam P.-S., and Mark N.C. Mean reversion in equilibrium asset prices. American Economic Review 80 (1990) 398-418
40. Cecchetti S.G., Lam P.-S., and Mark N.C. The equity premium and the risk-free rate: matching the moments. Journal of Monetary Economics 31 (1993) 21-45
41. Cecchetti S.G., Lam P.-S., and Mark N.C. Asset pricing with distorted beliefs: are equity returns too good to be true?. Working Paper No. 6354 (1998), NBER, Princeton, NJ
42. Chen N. Financial investment opportunities and the macroeconomy. Journal of Finance 46 (1991) 529-554
43. Chou R.Y., Engle R.F., and Kane A. Measuring risk aversion from excess returns on a stock index. Journal of Econometrics 52 (1992) 201-224
44. Chow G.C. Rational versus adaptive expectation in present value models. Review of Economics and Statistics 71 (1989) 376-384
45. Christiano L.J., and Fisher J. Tobin's q and asset returns: implications for business cycle analysis. Working Paper No. 5292 (1995), NBER
46. Cochrane J.H. Production-based asset pricing and the link between stock returns and economic fluctuations. Journal of Finance 46 (1991) 209-237
47. Cochrane J.H. A cross-sectional test of an investment-based asset pricing model. Journal of Political Economy 104 (1996) 572-621
48. Cochrane J.H., and Hansen L.P. Asset pricing lessons for macroeconomics. In: Blanchard O.J., and Fischer S. (Eds). NBER Macroeconomics Annual 1992 (1992), The MIT Press
49. Constantinides G.M. Habit formation: a resolution of the equity premium puzzle. Journal of Political Economy 98 (1990) 519-543
50. Constantinides G.M., and Duffie D. Asset pricing with heterogeneous consumers. Journal of Political Economy 104 (1996) 219-240
51. Constantinides G.M., Donaldson J.B., and Mehra R. Junior can't borrow: a new perspective on the equity premium puzzle. Working Paper No. 6617 (1998), NBER, Cambridge
52. Cutler D.M., Poterba J.M., and Summers L.H. Speculative dynamics. Review of Economic Studies 58 (1991) 529-546
53. Deaton A.S. Saving and liquidity constraints. Econometrica 59 (1991) 1221-1248
54. DeLong J.B., Shleifer A., Summers L.H., and Waldmann R.J. Noise trader risk in financial markets. Journal of Political Economy 98 (1990) 703-738
55. Dunn K.B., and Singleton K.J. Modeling the term structure of interest rates under non-separable utility and durability of goods. Journal of Financial Economics 17 (1986) 27-55
56. Epstein L.G., and Zin S.E. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: a theoretical framework. Econometrica 57 (1989) 937-968
57. Epstein L.G., and Zin S.E. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: an empirical investigation. Journal of Political Economy 99 (1991) 263-286
58. Estrella A., and Hardouvelis G.A. The term structure as a predictor of real economic activity. Journal of Finance 46 (1991) 555-576
59. Fama E.F., and Bliss R. The information in long-maturity forward rates. American Economic Review 77 (1987) 680-692
60. Fama E.F., and French K.R. Permanent and temporary components of stock prices. Journal of Political Economy 96 (1988) 246-273
61. Fama E.F., and French K.R. Dividend yields and expected stock returns. Journal of Financial Economics 22 (1988) 3-27
62. Fama E.F., and French K.R. Business conditions and expected returns on stocks and bonds. Journal of Financial Economics 25 (1989) 23-49
63. Ferson W.E., and Constantinides G.M. Habit persistence and durability in aggregate consumption: empirical tests. Journal of Financial Economics 29 (1991) 199-240
64. French K., Schwert G.W., and Stambaugh R.F. Expected stock returns and volatility. Journal of Financial Economics 19 (1987) 3-30
65. Frennberg P., and Hansson B. Computation of a monthly index for Swedish stock returns 1919-1989. Scandinavian Economic History Review 40 (1992) 3-27
66. Froot K., and Obstfeld M. Intrinsic bubbles: the case of stock prices. American Economic Review 81 (1991) 1189-1217
67. Glosten L., Jagannathan R., and Runkle D. On the relation between the expected value and the volatility of the nominal excess return on stocks. Journal of Finance 48 (1993) 1779-1801
68. Goetzmann W.N., and Jorion P. A century of global stock markets. Working Paper No. 5901 (1997), NBER
69. Grossman S.J., and Shiller R.J. The determinants of the variability of stock market prices. American Economic Review 71 (1981) 222-227
70. Grossman S.J., and Shiller R.J. Consumption correlatedness and risk measurement in economies with non-traded assets and heterogeneous information. Journal of Financial Economics 10 (1982) 195-210
71. Grossman S.J., and Zhou Z. Equilibrium analysis of portfolio insurance. Journal of Finance 51 (1996) 1379-1403
72. Grossman S.J., Melino A., and Shiller R.J. Estimating the continuous time consumption based asset pricing model. Journal of Business and Economic Statistics 5 (1987) 315-328
73. Hall R.E. Intertemporal substitution in consumption. Journal of Political Economy 96 (1988) 221-273
74. Hamilton J.D. A new approach to the analysis of nonstationary returns and the business cycle. Econometrica 57 (1989) 357-384
75. Hansen L.P., and Jagannathan R. Restrictions on intertemporal marginal rates of substitution implied by asset returns. Journal of Political Economy 99 (1991) 225-262
76. Hansen L.P., and Singleton K.J. Stochastic consumption, risk aversion, and the temporal behavior of asset returns. Journal of Political Economy 91 (1983) 249-268
77. unpublished paper. Hansen L.P., Sargent T.J., and Tallarini Jr. T.D. Robust permanent income and pricing. forthcoming. Review of Economic Studies (1997), University of Chicago and Carnegie Mellon University
78. Hardouvelis G.A. The term structure spread and future changes in long and short rates in the G7 countries: Is there a puzzle?. Journal of Monetary Economics 33 (1994) 255-283
79. Harvey C.R. Time-varying conditional covariances in tests of asset pricing models. Journal of Financial Economics 24 (1989) 289-317
80. Harvey C.R. The world price of covariance risk. Journal of Finance 46 (1991) 111-157
81. Hassler J., Lundvik P., Persson T., and Söderlind P. The Swedish business cycle: stylized facts over 130 years. In: Bergström V., and Vredin A. (Eds). Measuring and Interpreting Business Cycles (1994), Clarendon Press
82. Heaton J. An empirical investigation of asset pricing with temporally dependent preference specifications. Econometrica 63 (1995) 681-717
83. Heaton J., and Lucas D.J. Evaluating the effects of incomplete markets on risk sharing and asset pricing. Journal of Political Economy 104 (1996) 443-487
84. Jermann U.J. Asset pricing in production economies. Journal of Monetary Economics 41 (1998) 257-275
85. Kandel S., and Stambaugh R.F. Asset returns and intertemporal preferences. Journal of Monetary Economics 27 (1991) 39-71
86. Kocherlakota N. The equity premium: it's still a puzzle. Journal of Economic Literature 34 (1996) 42-71
87. Kreps D.M., and Porteus E.L. Temporal resolution of uncertainty and dynamic choice theory. Econometrica 46 (1978) 185-200
88. Krusell P., and Smith Jr. A.A. Income and wealth heterogeneity, portfolio choice, and equilibrium asset returns. Macroeconomic Dynamics 1 (1997) 387-422
89. Kugler P. An empirical note on the term structure and interest rate stabilization policies. Quarterly Journal of Economics 103 (1988) 789-792
90. La Porta R., Lopez-de-Silanes F., Shleifer A., and Vishny R.W. Legal determinants of external finance. Journal of Finance 52 (1997) 1131-1150
91. LeRoy S.F., and Porter R.D. The present value relation: tests based on variance bounds. Econometrica 49 (1981) 555-577
92. unpublished paper. Lettau M. Idiosyncratic risk and volatility bounds (1997), CentER, Tilburg University, Oxford
93. unpublished paper. Lettau M., and Uhlig H. Asset prices and business cycles: successes and pitfalls of the general equilibrium approach (1996), CentER, Tilburg University
94. Lucas Jr. R.E. Asset prices in an exchange economy. Econometrica 46 (1978) 1429-1446
95. Mankiw N.G. The equity premium and the concentration of aggregate shocks. Journal of Financial Economics 17 (1986) 211-219
96. Mankiw N.G., and Miron J.A. The changing behavior of the term structure of interest rates. Quarterly Journal of Economics 101 (1986) 211-228
97. Mankiw N.G., and Zeldes S.P. The consumption of stockholders and non-stockholders. Journal of Financial Economics 29 (1991) 97-112
98. Mehra R., and Prescott E.C. The equity premium puzzle. Journal of Monetary Economics 15 (1985) 145-161
99. Merton R. An intertemporal capital asset pricing model. Econometrica 41 (1973) 867-887
100. Miron J.A. Seasonal fluctuations and the life cycle-permanent income hypothesis of consumption. Journal of Political Economy 94 (1986) 1258-1279
101. Nelson C.R., and Startz R. The distribution of the instrumental variables estimator and its t-ratio when the instrument is a poor one. Journal of Business 63 (1990) S125-S140
102. Poterba J.M., and Summers L.H. Mean reversion in stock returns: evidence and implications. Journal of Financial Economics 22 (1988) 27-60
103. Prescott E.C. Theory ahead of business cycle measurement. Carnegie-Rochester Conference Series on Public Policy 25 (1986) 11-66
104. Restoy F., and Weil P. Approximate equilibrium asset prices. Working Paper No. 6611 (1998), NBER
105. Rietz T. The equity risk premium: a solution?. Journal of Monetary Economics 21 (1988) 117-132
106. Rouwenhorst K.G. Asset pricing implications of equilibrium business cycle models. In: Cooley T.F. (Ed). Frontiers of Business Cycle Research (1995), Princeton University Press
107. Ryder Jr. H.E., and Heal G.M. Optimum growth with intertemporally dependent preferences. Review of Economic Studies 40 (1973) 1-33
108. unpublished paper. Sandroni A. Asset prices, wealth distribution, and intertemporal preference shocks (1997), University of Pennsylvania, Princeton, NJ
109. Santos M.S., and Woodford M. Rational asset pricing bubbles. Econometrica 65 (1997) 19-57
110. Schwert G.W. Why does stock market volatility change over time?. Journal of Finance 44 (1989) 1115-1153
111. Shiller R.J. Do stock prices move too much to be justified by subsequent changes in dividends?. American Economic Review 71 (1981) 421-436
112. Shiller R.J. Consumption, asset markets, and macroeconomic fluctuations. Carnegie Mellon Conference Series on Public Policy 17 (1982) 203-238
113. Shiller R.J. Stock prices and social dynamics. Brookings Papers on Economic Activity 1984 2 (1984) 457-498
114. ch. 20, this Handbook. Shiller R.J. Human behavior and the efficiency of the financial system (1999)
115. Singleton K. Specification and estimation of intertemporal asset pricing models. In: Friedman B., and Hahn F. (Eds). Handbook of Monetary Economics (1990), North-Holland
116. Sun T. Real and nominal interest rates: a discrete-time model and its continuous-time limit. Review of Financial Studies 5 (1992) 581-611
117. Sundaresan S.M. Intertemporally dependent preferences and the volatility of consumption and wealth. Review of Financial Studies 2 (1989) 73-88
118. Svensson L.E.O. Portfolio choice with non-expected utility in continuous time. Economics Letters 30 (1989) 313-317
119. The Economist. One Hundred Years of Economic Statistics (1987), The Economist, Amsterdam
120. Tirole J. Asset bubbles and overlapping generations. Econometrica 53 (1985) 1499-1527
121. Vasicek O. An equilibrium characterization of the term structure. Journal of Financial Economics 5 (1977) 177-188
122. Wang J. The term structure of interest rates in a pure exchange economy with heterogeneous investors. Journal of Financial Economics 41 (1996) 75-110
123. Weil P. The equity premium puzzle and the risk-free rate puzzle. Journal of Monetary Economics 24 (1989) 401-421
124. Wheatley S. Some tests of the consumption-based asset pricing model. Journal of Monetary Economics 22 (1988) 193-218
125. Wilcox D. The construction of US consumption data: some facts and their implications for empirical work. American Economic Review 82 (1992) 922-941