Nonlinearity and Endogeneity in Macro-Asset Pricing

Author/Editor:

Charles Frederick Kramer ; Craig Hiemstra

Publication Date:

March 1, 1995

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:

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:

English

Publication Date:

March 1, 1995

ISBN/ISSN:

9781451845082/1018-5941

Stock No:

WPIEA0321995

Pages:

30

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