Nonlinearity and Endogeneity in Macro-Asset Pricing

By Charles Frederick Kramer, Craig Hiemstra

March 1, 1995

Preview Citation

Format: Chicago

Charles Frederick Kramer, and Craig Hiemstra. Nonlinearity and Endogeneity in Macro-Asset Pricing, (USA: International Monetary Fund, 1995) accessed December 22, 2024

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.

Subject: Asset prices, Consumption, Industrial production, Inflation, Stocks

Keywords: Time series, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/032
Stock No:

WPIEA0321995
ISBN:

9781451845082
ISSN:

1018-5941

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