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Where is the market going? Uncertain facts and novel theories

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  • John H. Cochrane

Abstract

The author surveys the statistical evidence on average stock return and the economic theories that try to explain it. The statistical evidence suggests a period of low returns, followed by a slow reversion to a high long-term average. However, that evidence is quite uncertain. Standard economics predicts tiny stock returns. The author surveys new economic models that predict high returns, but by fundamentally changing the description of stock market risk. He warns that a low forecast for stock returns does not mean one should sell.

Suggested Citation

  • John H. Cochrane, 1997. "Where is the market going? Uncertain facts and novel theories," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 21(Nov), pages 3-37.
    • Handle: RePEc:fip:fedhep:y:1997:i:nov:p:3-37:n:v.21no.6
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    References listed on IDEAS

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    More about this item

    Keywords

    Stocks; Risk;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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