Asset Prices and Time-Varying Risk
Observers have often characterized asset markets as being subject to periods of tranquility and periods of turbulence. Until recently, however, researchers were unable to produce closed-form asset pricing formulas in a model environment of time-varying risk. Some work by Abel provided us with the insights needed to produce such formulas. This paper gives an exposition of how to develop the formulas in an, environment where the formulas may be obtained using a simple extension of standard tools. While the paper is intended mainly as an exposition of new work, it also contains a report on the asset market effect of fiscal reform. IC is found that entering a period of week coordination between government spending end taxing (tax rate) policy is good for stock prices.
|Date of creation:||Dec 1988|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hansen, Lars Peter & Sargent, Thomas J., 1980.
"Formulating and estimating dynamic linear rational expectations models,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 2(1), pages 7-46, May.
- Lars Peter Hansen & Thomas J. Sargent, 1979. "Formulating and estimating dynamic linear rational expectations models," Working Papers 127, Federal Reserve Bank of Minneapolis.
- Abel, Andrew B., 1988.
"Stock prices under time-varying dividend risk : An exact solution in an infinite-horizon general equilibrium model,"
Journal of Monetary Economics,
Elsevier, vol. 22(3), pages 375-393.
- Andrew B. Abel, 1988. "Stock Prices Under Time-Varying Dividend Risk: An Exact Solution In An Infinite-Horizon General Equilibrium Model," NBER Working Papers 2621, National Bureau of Economic Research, Inc.
- Andrew Abel, . "Stock Prices Under Time-Varying Dividend Risk: An Exact Solution in an Infinite-Horizon General Equilibrium Model," Rodney L. White Center for Financial Research Working Papers 15-88, Wharton School Rodney L. White Center for Financial Research.
- Flavin, Marjorie A, 1983. "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 929-56, December.
- Robert P. Flood & Robert J. Hodrick & Paul Kaplan, 1986. "An Evaluation of Recent Evidence on Stock Market Bubbles," NBER Working Papers 1971, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2780. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.