Asset Pricing at the Millennium

75 Pages Posted: 9 Jul 2000 Last revised: 28 Sep 2022

See all articles by John Y. Campbell

John Y. Campbell

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

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Date Written: March 2000

Abstract

This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work, and on the tradeoff between risk and return. Modern research seeks to understand the behavior of the stochastic discount factor (SDF) that prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, while patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance.

Suggested Citation

Campbell, John Y., Asset Pricing at the Millennium (March 2000). NBER Working Paper No. w7589, Available at SSRN: https://ssrn.com/abstract=227639

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