Asset Pricing At The Millennium
John Y. Campbell
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
Harvard Institute of Economic Research Paper No. 1897
This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work, and on the tradeoff 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, while 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.
Number of Pages in PDF File: 76
JEL Classification: G12working papers series
Date posted: September 6, 2000
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