1988
DOI: 10.3386/w2762
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Mean Reversion in Equilibrium Asset Prices

Abstract: From this evidence, we conclude that the degree of serial correlation in the data could plausibly have been generated by our model.

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Cited by 211 publications
(237 citation statements)
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“…We do this assuming that expansions are characterized by a high growth rate and low volatility of profits, whereas economic recessions have a low growth rate and high volatility. The numerical results reported in Table 1 conform with the results for asset prices at the aggregate level obtained by Cecchetti, Lam, and Mark (1990) and Driffill and Sola (1998) when the required rate of return is not regime-specific and exclusive of the regime switching risk premium.…”
Section: The Modelsupporting
confidence: 72%
“…We do this assuming that expansions are characterized by a high growth rate and low volatility of profits, whereas economic recessions have a low growth rate and high volatility. The numerical results reported in Table 1 conform with the results for asset prices at the aggregate level obtained by Cecchetti, Lam, and Mark (1990) and Driffill and Sola (1998) when the required rate of return is not regime-specific and exclusive of the regime switching risk premium.…”
Section: The Modelsupporting
confidence: 72%
“…Within such a model, the economy's endowment switches between high economic growth and low economic growth. Such switching fundamentals have been shown by Ceccheti, et al (1990) to account for a number of features of stock market returns, such as kurtosis and mean reversion.…”
Section: Introductionmentioning
confidence: 99%
“…His model falls into the STAR family of models, where a continuous transition function G(q t ) between 0 and 1 is used instead of the indicator function I t . 9 The empirical evidence found in this last branch of literature is also dependent on the sample and the particular specification considered. For instance, the evidence in Coakley and Fuertes (2006) is based on monthly data from January 1871 to September 2001 for the Standard and Poors PD ratio.…”
Section: Nonlinear Processes and The Pd Ratio Dynamicsmentioning
confidence: 99%