1 option
Interpretable Asset Markets? / Ravi Bansal, Varoujan Khatachtrian, Amir Yaron.
- Format:
- Book
- Author/Creator:
- Bansal, Ravi.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w9383.
- NBER working paper series no. w9383
- Language:
- English
- Subjects (All):
- Capital market--Mathematical models.
- Capital market.
- Financial crises.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2002.
- Cambridge, Mass. : National Bureau of Economic Research, 2002.
- Summary:
- In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises that is, financial markets dislike economic uncertainty. Moreover, future earnings growth rates are sharply predicted by current price-earnings ratios. It seems that much of the variation in asset prices can be attributed to fluctuations in economic uncertainty and expected cash-flow growth. This empirical evidence is consistent with the implications of existing parametric general equilibrium models. Hence, the channels of fluctuating economic uncertainty and expected growth seem important for interpreting asset markets.
- Notes:
- Print version record
- December 2002.
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