Abstract

http://ssrn.com/abstract=226905
 
 

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Asset Pricing Explorations for Macroeconomics


John H. Cochrane


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Lars Peter Hansen


University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

April 1993

NBER Working Paper No. w4088

Abstract:     
In this paper we argue that financial data are a useful proving ground for macroeconomic models, and we explore the channels that link asset market data to such models. We use Hansen and Jagannathan's bounds on the mean and standard deviation of discount factors to survey several asset pricing puzzles. We then extend the bounds to reflect the correlation of discount factors with asset returns and to characterize conditional moments of discount factors. These characterizations help us to understand the behavior of a variety of models studied in the literature. We also incorporate borrowing constraints into the calculations. The borrowing constraints loosen the required properties of aggregate measurements of intertemporal marginal rates of substitution, but also sharpen the implications of asset market data for the marginal rates of substitution of unconstrained individuals.

Number of Pages in PDF File: 76

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Date posted: April 27, 2000  

Suggested Citation

Cochrane, John H. and Hansen, Lars Peter, Asset Pricing Explorations for Macroeconomics (April 1993). NBER Working Paper No. w4088. Available at SSRN: http://ssrn.com/abstract=226905

Contact Information

John H. Cochrane (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3059 (Phone)
773-702-0458 (Fax)
HOME PAGE: http://faculty.chicagobooth.edu/john.cochrane/research/Papers/

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National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Lars Peter Hansen
University of Chicago - Department of Economics ( email )
1101 E 58th ST
Chicago, IL 60637
United States
773-702-8170 (Phone)
773-702-8490 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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