Consumption and Expected Asset Returns without Assumptions About Unobservables

Karl Whelan ()

MPRA Paper from University Library of Munich, Germany

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: Asset Returns; Consumption (search for similar items in EconPapers)
JEL-codes: E21 G12 (search for similar items in EconPapers)
Date: 2006-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/5891/1/MPRA_paper_5891.pdf original version (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)
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:pra:mprapa:5891

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().