Macroeconomic Fluctuations and Equilibrium Discount Factors

Author/Editor:

Charles Frederick Kramer

Publication Date:

October 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The estimation of discount factors is a central issue in empirical finance, particularly in the literature on excess volatility. In particular, it is difficult to find empirical discount factors that are volatile enough to account for fluctuations in asset prices. This paper constructs discount factors from some macroeconomic time series commonly used in empirical models of asset prices. Data for the U.S. stock market imply some evidence that discount factors relate to macroeconomic conditions, but comparison of the estimated discount factors to Hansen-Jagannathan (1991) bounds shows that the candidate discount factors cannot account for the volatility in asset returns.

Series:

Working Paper No. 96/118

English

Publication Date:

October 1, 1996

ISBN/ISSN:

9781451940886/1018-5941

Stock No:

WPIEA1181996

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

24

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