IMF Working Papers

Macroeconomic Fluctuations and Equilibrium Discount Factors

By Charles Frederick Kramer

October 1, 1996

Preview Citation

Format: Chicago

Charles Frederick Kramer. Macroeconomic Fluctuations and Equilibrium Discount Factors, (USA: International Monetary Fund, 1996) accessed September 18, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The estimation of discount factors is a central issue in empirical finance, particularly in the literature on excess volatility. In particular, it is difficult to find empirical discount factors that are volatile enough to account for fluctuations in asset prices. This paper constructs discount factors from some macroeconomic time series commonly used in empirical models of asset prices. Data for the U.S. stock market imply some evidence that discount factors relate to macroeconomic conditions, but comparison of the estimated discount factors to Hansen-Jagannathan (1991) bounds shows that the candidate discount factors cannot account for the volatility in asset returns.

Subject: Consumption, Factor models, Stocks, Treasury bills and bonds, Yield curve

Keywords: Discount factor, Time series, WP

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1996/118

  • Stock No:

    WPIEA1181996

  • ISBN:

    9781451940886

  • ISSN:

    1018-5941