Nonlinearity and Endogeneity in Macro-Asset Pricing
Summary:
We find nonlinear feedback between the stock market and certain macroeconomic factors. This evidence calls into question the adequacy of these factors as a basis for a linear pricing model. It also means that the interaction between the economy and the stock market is more complicated than given by the simple relationship in Chen, Roll and Ross (1986). It also suggests that the univariate evidence for nonlinear dynamics in the stock market may be due to the complicated relationship between the macroeconomy and the stock market.
Series:
Working Paper No. 1995/032
Subject:
Asset prices Consumption Industrial production Inflation Stocks
English
Publication Date:
March 1, 1995
ISBN/ISSN:
9781451845082/1018-5941
Stock No:
WPIEA0321995
Pages:
30
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