Consumption and expected asset returns without assumptions about unobservables

Karl Whelan ()

Open Access publications from School of Economics, University College Dublin

Abstract: If asset returns are predictable, then rational expectations and the arithmetic of budget constraints together imply that these predictable changes in returns should affect current consumption. This paper presents a new framework linking consumption, income, and observable assets to expectations of future asset returns. Relative to previous work on this topic, the framework proposed in this paper has a number of advantages including not relying on untestable assumptions concerning unobservable variables and not requiring estimation of unknown parameters to arrive at a forecasting variable.

Keywords: Consumption (Economics); Assets (Accounting); Economic forecasting (search for similar items in EconPapers)
Date: 2006-05
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http://hdl.handle.net/10197/219 Open Access version, 2006 (application/pdf)

Related works:
Journal Article: Consumption and expected asset returns without assumptions about unobservables (2008)
Working Paper: Consumption and Expected Asset Returns Without Assumptions About Unobservables (2006)
Working Paper: Consumption and Expected Asset Returns without Assumptions About Unobservables (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/219

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