At the end of the period: 1 sell the portfolio 2 use the proceeds to buy back the mispriced asset 3 pocket the difference. Resultsthatincludethese series are availablein an earlierdraftof the paper,which is availablefrom the authorson request.
In a one-good intertemporalasset-pricingmodel, assets will be priced accordingto their covarianceswith aggregate marginal utility of consumption see Lucas ;Breeden ;or Cox et al.
Ibbotson and Companyfor the period priorto The time-series means of these estimates were then tested by a t-test for significantdifferencefrom zero. It would not be inconsistent with asset-pricing theory to discover, for example, that the betas on the marketportfolio were sufficient to capture the pricing impact of the macroeconomic state variables,and it would certainlyrationalizepast efforts that have focused on examiningthe efficiency of a marketindex.
To deal with this problem, we led the CG series forwardby 1 month. Additionally, any variables that are necessary to complete the descriptionof the state of naturewill also be part of the description of the systematic risk factors.
Journal of Economic Theory The betas for the other variableswere estimatedas before, from time-seriesmultiple regressions. It could be arguedthat UPR capturesa leverage effect, with highlylevered firms UPR is also similarto a measureof being associated with lower ratings.
Economic Forces and the Stock Market related with long-term bond returns, abstractingfrom unanticipated changes in inflationor in expected inflationand holdingall other characteristics equal, will be more valuable than stocks that are uncorrelated or negatively correlatedwith long-termbond returns.
A procedurewas developed for forecastingexpected YP t and a series of unanticipated changes in YP tand changesin the expectationitself were examined for their influence on pricing.
The yearly production series, YP, was not significantin any subperiod,and, as can be seen from partB, deletingit had no substantiveeffect on the remainingstate variables. Parts C and D of table 4 report the results of such tests.