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Consumption, Asset Markets, and Macroeconomic Fluctuations

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  • Robert J. Shiller

Abstract

A broad exploratory data analysis is conducted to assess the promise of a kind of model in which long-term asset prices change through time primarily due to consumption related changes in the rate of discount. Aggregate consumption data are used to infer ex-post marginal rates of substitution. Prices of stocks, bonds, short debt, land and housing are examined for the period 1890 to 1980, Methods are explored of evaluating this kind of model in the absence of accurate data on consumption.

Suggested Citation

  • Robert J. Shiller, 1982. "Consumption, Asset Markets, and Macroeconomic Fluctuations," NBER Working Papers 0838, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0838
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    1. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1.
    2. Frederick R. Macaulay, 1938. "Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856," NBER Books, National Bureau of Economic Research, Inc, number maca38-1.
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    Cited by:

    1. John H. Cochrane, 1997. "Where is the market going? Uncertain facts and novel theories," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 3-37.
    2. David A. Chapman, 2002. "Does Intrinsic Habit Formation Actually Resolve the Equity Premium Puzzle?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 618-645, July.
    3. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter.
    4. Jonathan A. Parker & Bruce Preston, 2005. "Precautionary Saving and Consumption Fluctuations," American Economic Review, American Economic Association, vol. 95(4), pages 1119-1143, September.
    5. Robert G. Chambers & John Quiggin, 2005. "Cost Minimization and Asset Pricing," Risk & Uncertainty Working Papers WP3R05, Risk and Sustainable Management Group, University of Queensland.
    6. repec:eee:riibaf:v:42:y:2017:i:c:p:39-60 is not listed on IDEAS
    7. Jonathan A. Parker, 2003. "Consumption Risk and Expected Stock Returns," American Economic Review, American Economic Association, vol. 93(2), pages 376-382, May.
    8. Selahattin Imrohoroglu, 2004. "A Note on the McGrattan and Prescott (2003) Adjustments and the Equity Premium Puzzle," Macroeconomics 0402009, University Library of Munich, Germany.
    9. Gollier, Christian, 2016. "Evaluation of long-dated assets: The role of parameter uncertainty," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 66-83.
    10. Miron, Jeffrey A, 1986. "Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1258-1279, December.
    11. Tack Yun & Wooheon Rhee, 2004. "Implications of Quasi-Geometric Discounting on the Observable Sharpe Ratio," Econometric Society 2004 North American Summer Meetings 243, Econometric Society.
    12. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
    13. repec:ucp:jpolec:doi:10.1086/694621 is not listed on IDEAS
    14. Chan, Kam C. & Norrbin, Stefan C. & Lai, Pikki, 1997. "Are stock and bond prices collinear in the long run?," International Review of Economics & Finance, Elsevier, vol. 6(2), pages 193-201.
    15. Barsky, Robert B, 1989. "Why Don't the Prices of Stocks and Bonds Move Together?," American Economic Review, American Economic Association, vol. 79(5), pages 1132-1145, December.
    16. Wayne E. Ferson & Andrew F. Siegel, 2003. "Stochastic Discount Factor Bounds with Conditioning Information," Review of Financial Studies, Society for Financial Studies, vol. 16(2), pages 567-595.
    17. Chun, Rodney M., 2000. "Compensation vouchers and equity markets: Evidence from Hungary," Journal of Banking & Finance, Elsevier, vol. 24(7), pages 1155-1178, July.
    18. Joe Akira Yoshino & Edson Bastos e Santos, 2009. "Revisiting the interest rate puzzle," Applied Economics Letters, Taylor & Francis Journals, vol. 16(13), pages 1333-1340.
    19. Ricardo M. Sousa, 2007. "Expectations, Shocks, and Asset Returns," NIPE Working Papers 29/2007, NIPE - Universidade do Minho.
    20. Mankiw, N Gregory & Shapiro, Matthew D, 1986. "Risk and Return: Consumption Beta versus Market Beta," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 452-459, August.
    21. Mimoza Shabani & Jan Toporowski, 2015. "A Nobel Prize for the Empirical Analysis of Asset Prices," Review of Political Economy, Taylor & Francis Journals, vol. 27(1), pages 62-85, January.
    22. Chen, XiaoHua & Maringer, Dietmar, 2011. "Detecting time-variation in corporate bond index returns: A smooth transition regression model," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 95-103, January.

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