NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Actual and Warranted Relations Between Asset Prices

Andrea E. Beltratti, Robert J. Shiller

NBER Working Paper No. 3640 (Also Reprint No. r1846)
Issued in March 1991
NBER Program(s):Monetary Economics

Efficient markets models assert that the price of each asset is equal to the optimal forecast of its ex-post (or fundamental) value, but the models do not imply that the covariances between prices equal the corresponding covariances of ex-post values. We present bounds for covariances and correlations of prices based on the covariance of ex-post values, and show how such bounds can be tightened using information about forecasting variables. The methods are used to examine the historical covariance between the U.S. and U.K. stock markers 1919-1989. The bounds on the covariance include the actual correlation.

download in pdf format
   (193 K)

download in djvu format
   (130 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3640

Published: Oxford Economic Papers, vol. 45, no. 3, p. 387-402, July 1993 citation courtesy of

Users who downloaded this paper also downloaded* these:
Shiller and Beltratti w3464 Stock Prices and Bond Yields: Can Their Comovements Be Explained in Terms of Present Value Models?
Shiller w2846 Comovements in Stock Prices and Comovements in Dividends
Shiller w0456 Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?
Campbell and Shiller w2511 Stock Prices, Earnings and Expected Dividends
Case, Shiller, and Thompson w18400 What Have They Been Thinking? Home Buyer Behavior in Hot and Cold Markets
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us