Asset Pricing at the Millennium
This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work and on the trade-off between risk and return. Modern research seeks to understand the behavior of the stochastic discount factor (SDF) that prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, whereas patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance. The definitive version is available at www.blackwell-synergy.com.
|Date of creation:||2000|
|Date of revision:|
|Publication status:||Published in Journal of Finance|
|Contact details of provider:|| Postal: |
Web page: http://www.economics.harvard.edu/
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