Asset Pricing Explorations for Macroeconomics

76 Pages Posted: 27 Apr 2000 Last revised: 4 Sep 2022

See all articles by John H. Cochrane

John H. Cochrane

Hoover Institution; National Bureau of Economic Research (NBER)

Lars Peter Hansen

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1992

Abstract

In this paper we argue that financial data are a useful proving ground for macroeconomic models, and we explore the channels that link asset market data to such models. We use Hansen and Jagannathan's bounds on the mean and standard deviation of discount factors to survey several asset pricing puzzles. We then extend the bounds to reflect the correlation of discount factors with asset returns and to characterize conditional moments of discount factors. These characterizations help us to understand the behavior of a variety of models studied in the literature. We also incorporate borrowing constraints into the calculations. The borrowing constraints loosen the required properties of aggregate measurements of intertemporal marginal rates of substitution, but also sharpen the implications of asset market data for the marginal rates of substitution of unconstrained individuals.

Suggested Citation

Cochrane, John H. and Hansen, Lars Peter, Asset Pricing Explorations for Macroeconomics (June 1992). NBER Working Paper No. w4088, Available at SSRN: https://ssrn.com/abstract=226905

John H. Cochrane (Contact Author)

Hoover Institution ( email )

Stanford, CA 94305-6010
United States
6507236708 (Phone)

HOME PAGE: http://www.johnhcochrane.com/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lars Peter Hansen

University of Chicago - Department of Economics ( email )

1101 E 58th ST
Chicago, IL 60637
United States
773-702-8170 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
154
Abstract Views
2,792
Rank
345,405
PlumX Metrics