EconPapers    
Economics at your fingertips  
 

Equilibrium Correlation of Asset Price and Return

Charles Leung ()

Discussion Papers from Chinese University of Hong Kong, Department of Economics

Abstract: Two empirical questions concerning the equity and housing have been studied extensively: (1) Are the price and return serially correlated, and (2) What is the optimal weight of housing in the portfolio? The answer to the second question crucially depends on the cross-correlation of assets. This paper complements the literature by building a simple dynamic general equilibrium with fully rational agents, and obtain closed form solutions for the implied auto- and cross-correlations. The length of time horizon, as well as the persistence of economic shock matter. Implications and future research directions are then discussed.

Keywords: rational expectation; price and return; serial and cross correlation; market efficiency; predictability (search for similar items in EconPapers)
JEL-codes: E30 G10 R20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-mac
Date: 2005-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.econ.cuhk.edu.hk/~discusspaper/00017.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Equilibrium Correlations of Asset Price and Return (2007) Downloads
Working Paper: Equilibrium Correlation of Asset Price and Return (2005) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chk:cuhkdc:00017

Access Statistics for this paper

More papers in Discussion Papers from Chinese University of Hong Kong, Department of Economics
Bibliographic data for series maintained by ().

 
Page updated 2020-01-12
Handle: RePEc:chk:cuhkdc:00017