TY  - JOUR
AU  - Brock,William A.
AU  - LeBaron,Blake
TI  - Liquidity Constraints in Production Based Asset Pricing Models
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3107
PY  - 1989
Y2  - September 1989
UR  - http://www.nber.org/papers/w3107
L1  - http://www.nber.org/papers/w3107.pdf
N1  - Author contact info:
William Brock
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI   537061393
E-Mail: wbrock@ssc.wisc.edu

Blake D. LeBaron
International Business School
Brandeis University, MS-021
Waltham, MA 02454-9110
Tel: 781/736-2258
Fax: 781/736-2269
E-Mail: blebaron@brandeis.edu
M1  - published as William A. Brock, Blake LeBaron. "Liquidity Constraints in Production-Based Asset-Pricing Models," in R. Glenn Hubbard, editor, "Asymmetric Information, Corporate Finance, and Investment" University of Chicago Press, 1990 (1990)

AB  - This paper explores the time series implications of introducing credit constraints into a production based asset pricing model. Simulations are performed choosing parameter values which generate reasonable values for aggregate fluctuations. These results show that mean reversion in simulated returns series, measured by variance ration tests, is enhanced with the introduction of binding credit constraints. Without these constraints there is very little evidence of mean reversion. This is consistent with financial market data where the weak evidence for mean reversion is stronger in small firm returns. Other tests are run on the simulated series including checking the standard deviation, skewness, and kurtosis. These other tests do not show strong differences between the constrained and unconstrained firms in the model.
ER  -