Using Production Based Asset Pricing To Explain The Behavior Of Stock Returns Over The Business Cycle

Download or read book Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle written by John H. Cochrane and published by . This book was released on 2001 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The investment return is defined as the real return that results from marginally increasing investment at date r, and then reaping the extra output and decreasing investment at date t+1 to leave the production plan for other dates unchanged. This paper constructs investment returns from investment data and a production function, and compares investment returns to stock returns, in order to explain forecasts of stock returns by business cycle related variables, and to explain forecasts of future economic activity by stock returns.