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What Information Drives Asset Prices?
2017
Social Science Research Network
The market price-dividend ratio is highly correlated with several macroeconomic variables, particularly inflation and labor market variables, but not with aggregate consumption and GDP. We incorporate this observation in an exchange economy with learning about the economic regime from consumption history and a latent signal. The estimated model rationalizes the moments of consumption and dividend growth, market return, price-dividend ratio, and real and nominal term structures and the low
doi:10.2139/ssrn.3015833
fatcat:tpejwpjslfdu7n6ni7fhzxi52m