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An Equilibrium Theory of Excess Volatility and Mean Reversion in Stock Market Prices / Alan J. Marcus.
- Format:
- Book
- Author/Creator:
- Marcus, Alan J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3106.
- NBER working paper series no. w3106
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1989.
- Summary:
- Apparent mean reversion and excess volatility in stock market prices can be reconciled with the Efficient Market Hypothesis by specifying investor preferences that give rise to the demand for portfolio insurance. Therefore, several supposed macro anomalies can be shown to be consistent with a rational market in a simple and parsimonious model of the economy. Unlike other models that have derived equilibrium mean reversion in prices, the model in this paper does not require that the production side of the economy exhibit mean reversion. It also predicts that mean reversion and excess volatility will differ substantially across subperiods.
- Notes:
- Print version record
- September 1989.
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