Consumption and expected asset returns without assumptions about unobservables

Karl Whelan ()

Journal of Monetary Economics, 2008, vol. 55, issue 7, 1209-1221

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; Asset; returns (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Consumption and Expected Asset Returns Without Assumptions About Unobservables (2006)
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:eee:moneco:v:55:y:2008:i:7:p:1209-1221

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