Nonlinearity and Endogeneity in Macro-Asset Pricing [electronic resource] / Charles Frederick Kramer.
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TextSeries: IMF Working Papers; Working Paper ; No. 95/32Publication details: Washington, D.C. : International Monetary Fund, 1995Description: 1 online resource (30 p.)ISBN: 1451845081 :ISSN: 1018-5941Subject(s): Bonds | Granger Causality | Statistics | Stock Returns | Time Series | United StatesAdditional physical formats: Print Version:: Nonlinearity and Endogeneity in Macro-Asset PricingOnline resources: IMF e-Library | IMF Book Store Abstract: We find nonlinear feedback between the stock market and certain macroeconomic factors. This evidence calls into question the adequacy of these factors as a basis for a linear pricing model. It also means that the interaction between the economy and the stock market is more complicated than given by the simple relationship in Chen, Roll and Ross (1986). It also suggests that the univariate evidence for nonlinear dynamics in the stock market may be due to the complicated relationship between the macroeconomy and the stock market.
We find nonlinear feedback between the stock market and certain macroeconomic factors. This evidence calls into question the adequacy of these factors as a basis for a linear pricing model. It also means that the interaction between the economy and the stock market is more complicated than given by the simple relationship in Chen, Roll and Ross (1986). It also suggests that the univariate evidence for nonlinear dynamics in the stock market may be due to the complicated relationship between the macroeconomy and the stock market.
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