Two Puzzles of Asset Pricing and Their Implications for Investors

→ Abel Andrew B. , 1990, “Asset Prices under Habit Formation and Catching Up with the Joneses,” American Economic Review Papers and Proceedings 80, 38–2.

→ Abel Andrew B. , 1999, “Risk Premia and Term Premia in General Equilibrium,” Journal of Monetary Economics 43, 3–33.

Abel Andrew B. Mankiw M. Gregory Summers Lawrence H. Richard J. Zeckhauser , 1989, “Assessing Dynamic Efficiency: Theory and Evidence,” Review of Economic Studies 56, 1–20.

Barberis Nicholas , 2000, “Investing for the Long Run when Returns are Predictable,” Journal of Finance 55, 225–264.

→ Barberis Nicholas Huang Ming Santos Tano , 2001, “Prospect Theory and Asset Prices,” Quarterly Journal of Economics 116, 1–53.

Barberis Nicholas Shleifer Andrei Vishny Robert , 1998, “A Model of Investor Sentiment,” Journal of Financial Economics 49, 307–343.

Barsky Robert B. Bradford De Long J. , 1993, “Why Does the Stock Market Fluctuate?,” Quarterly Journal of Economics 107, 291–311.

Bernstein Peter , 1996, Against the Gods: The Remarkable Story of Risk, Wiley.

Blanchard Olivier J. Watson Mark , 1982, “Bubbles, Rational Expectations, and Financial Markets,” in Wachtel P. ed., Crises in the Economic and Financial Structure: Bubbles, Bursts, and Shocks, Lexington: Lexington, MA.

Breeden Douglas T. , 1979, “An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities,” Journal of Financial Economics 7, 265–296.

→ Brennan Michael J. Eduardo S. Schwartz Lagnado Ronald , 1997, ‘Strategic Asset Allocation,” Journal of Economic Dynamics and Control 21, 1377–1403.

Campbell John Y. , 1987, “Stock Returns and the Term Structure,” Journal of Financial Economics 18, 373–399.

→ Campbell John Y. , 1991, “A Variance Decomposition for Stock Returns,” Economic Journal 101, 157–179.

Campbell John Y. , 1996, “Understanding Risk and Return,” Journal of Political Economy 104, 298–345.

Campbell John Y. , 1999, “Asset Prices, Consumption, and the Business Cycle,” Chapter 19 in Taylor John Woodford Michael eds. Handbook of Macroeconomics Vol. 1, 1231–1303, North-Holland, Amsterdam.

Campbell John Y. , 2000, “Asset Pricing at the Millennium,” Journal of Finance 55, 1515–1567.

Campbell John Y. , 2003, “Consumption-Based Asset Pricing,” forthcoming in Constantinides George Harris Milton Stulz Rene eds. Handbook of the Economics of Finance, North-Holland, Amsterdam.

Campbell John Y. John H. Cochrane , 1999, “By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior,” Journal of Political Economy 107, 205–251.

Campbell John Y. Mankiw N. Gregory , 1989, “Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence,” in Olivier J. Blanchard Fischer Stanley eds., National Bureau of Economic Research Macroeconomics Annual 4, 185–216.

→ Campbell John Y. Robert J. Shiller , 1988, “The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors,” Review of Financial Studies 1, 195–228.

Campbell John Y. Robert J. Shiller , 2003, “Valuation Ratios and the Long-Run Stock Market Outlook: An Update,” forthcoming in Thaler Richard . ed. Advances in Behavioral Finance, Vol. II, Russell Sage Foundation.

Campbell John Y. Luis M. Viceira , 1999 “Consumption and Portfolio Decisions When Expected Returns Are Time Varying, Quarterly Journal of Economics 114, 433–495.

Campbell John Y. Luis M. Viceira , 2001 “Who Should Buy Long-Term Bonds?,” American Economic Review 91, 99–127.

Campbell John Y. Luis M. Viceira , 2002, Strategic Asset Allocation: Portfolio Choice for Long–Term Investors, Oxford University Press Oxford.

Campbell John Y. Yogo Motohiro , 2002, “Efficient Tests of Stock Return Predictability,” unpublished paper, Harvard University.

Cecchetti Stephen G. Pok–sang Lam Nelson C. Mark , 1993, “The Equity Premium and the Risk–Free Rate: Matching the Moments,” Journal of Monetary Economics 31, 21–45.

→ Cecchetti Stephen G. Pok-Sang Lam Nelson C. Mark , 2000, “Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good to Be” True?” American Economic Review 90, 787–805.

→ Chan Lewis Y. Kogan Leonid , 2002, “Catching Up with the Joneses: Heterogeneous Preferences” and the Dynamics of Asset Prices,” Journal of Political Economy 110, 1255–1285.

Cochrane John H. , 2001, Asset Pricing, Princeton University Press, Princeton, NJ.

Cogley Timothy , 1998, “Idiosyncratic Risk and the Equity Premium: Evidence from the Consumer Expenditure Survey,” working paper, Federal Reserve Bank of San Francisco.

→ Constantinides George M. , 1990, “Habit Formation: A Resolution of the Equity Premium Puzzle,” Journal of Political Economy 98, 519–543.

→ Constantinides George M. John B. Donaldson Mehra Rajnish , 2002, “Junior Can't Borrow: A New Perspective on the Equity Premium Puzzle,” Quarterly Journal of Economics 117, 269–296.

→ Constantinides George M. Duffie Darrell , 1996, “Asset Pricing with Heterogeneous Consumers,” Journal of Political Economy 104, 219–240.

Dimson Elroy Marsh Paul Staunton Mike , 2002, Triumph of the Optimists, Princeton University Press, Princeton, NJ.

Dumas Bernard , 1989, “Two-person Dynamic Equilibrium in the Capital Market, Review of Financial Studies 2, 157–188.

→ Epstein Lawrence Stanley Zin , 1989, “Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework,” Econometrica 57, 937–969.

→ Epstein Lawrence Stanley Zin , 1991, “Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Investigation,” Journal of Political Economy 99, 263–286.

→ Fama Eugene Kenneth R. French , 2002, “The Equity Premium,” Journal of Finance 57, 637–659.

Glassman James K. Kevin A. Hassett , 1999, Dow 36,000, Times Books: New York, NY.

Gordon Myron , 1962, The Investment, Financing, and Valuation of the Corporation, Irwin: Homewood, IL.

Graham Benjamin David L. Dodd , 1934, Security Analysis, McGraw-Hill: New York, NY.

→ Grossman Sanford J. Robert J. Shiller , 1981, “The Determinants of the Variability of Stock Market Prices,” American Economic Review 71, 222–227.

→ Grossman Sanford J. Robert J. Shiller , 1982, “Consumption Correlatedness and Risk Measurement in Economies With Non-Traded Assets and Heterogeneous Information,” Journal of Financial Economics 10, 195–210.

→ Grossman Sanford J. Zhou Z. , 1996, “Equilibrium Analysis of Portfolio Insurance,” Journal of Finance 51, 1379–1403.

Hall Robert E. , 1988, “Intertemporal Substitution in Consumption,” Journal of Political Economy 96, 221–273.

→ Hamilton James D. , 1989, “A New Approach to the Analysis of Nonstationary Returns and the Business Cycle,” Econometrica 57, 357–384.

→ Hansen Lars P. Jagannathan Ravi , 1991, “Restrictions on Intertemporal Marginal Rates of Substitution Implied by Asset Returns,” Journal of Political Economy 99, 225–262.

→ Hansen Lars P. Thomas J. Sargent Tallarini Thomas , 1999, “Robust Permanent Income and Pricing,” Review of Economic Studies 66, 873–907.

→ Harvey Campbell R. , 1989, “Time–Varying Conditional Covariances in Tests of Asset Pricing Models,” Journal of Financial Economics 24, 289–317.

Heaton John Lucas Deborah , 1996, “Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing,” Journal of Political Economy 104, 668–712.

Heaton John Lucas Deborah , 1999, “Stock, Prices and Fundamentals,” NBER Macroeconomics Annual 213–242, MIT Press, Cambridge, MA.

Jagannathan Ravi McGrattan Ellen R. Scherbina Anna , 2000, “The Declining US Equity Premium,” Federal Reserve Bank of Minneapolis Quarterly Review 24(4), 3–19.

Jorion Philippe William N. Goetzmann , 1999, “Global Stock Markets in the Twentieth Century,” Journal of Finance 54, 953–980.

→ Kandel Shmuel Robert F. Stambaugh , 1991 “Asset Returns and Intertemporal Preferences,” Journal of Monetary Economics 27, 39–71.

→ Kocherlakota Narayana , 1996, “The Equity Premium: It's Still A Puzzle,” Journal of Economic Literature 34, 42–71.

Krusell Per Smith A.A. Jr. , 1997, “Income and Wealth Heterogeneity, Portfolio Choice, and Equilibrium Asset Returns,” Macroeconomic Dynamics 1, 387–422.

Lettau Martin , 2002, “Idiosyncratic Risk and Volatility Bounds, or Can Models with Idiosyncratic Risk Solve the Equity Premium Puzzle?,” Review of Economics and Statistics 84, 376–380.

→ Lettau Martin Ludvigson Sydney , 2001, “Consumption, Aggregate Wealth, and Expected Stock Returns,” Journal of Finance 56, 815–849.

Lewellen Jonathan , 2003, “Predicting Returns with Financial Ratios,” forthcoming, Journal of Financial Economics.

Liang Nellie Steven A. Sharpe , 1999, “Share Repurchases and Employee Stock Options and their Implications for S&P500 Share Retirements and Expected Returns,” unpublished paper, Board of Governors of the Federal Reserve System.

→ Lucas Robert E. Jr. , 1978, “Asset Prices in an Exchange Economy,” Econometrica 46, 1429–1446.

Mankiw Gregory N. , 1986, “The Equity Premium and the Concentration of Aggregate Shocks,” Journal of Financial Economics 17, 211–219.

→ Markowitz Harry , 1952, “Portfolio Selection,” Journal of Finance 7, 77–91.

McGrattan Ellen R. Edward C. Prescott , 2000, “Is the Stock Market Overvalued?,” Federal Reserve Bank of Minneapolis Quarterly Review 24(4), 20–40.

→ Mehra Rajnish Edward C. Prescott , 1985, “The Equity Premium: A Puzzle,” Journal of Monetary Economics 15, 145–161.

→ Merton Robert C. , 1969, “Lifetime Portfolio Selection Under Uncertainty: The Continuous Time Case,” Review of Economics and Statistics 51, 247–257.

Merton Robert C. , 1971, “Optimum Consumption and Portfolio Rules in a Continuous-Time Model,” Journal of Economic Theory 3, 373–413.

Merton Robert C. , 1973, “An Intertemporal Capital Asset Pricing Model,” Econometrica 41, 867–887.

Modigliani Franco Richard A. Cohn , 1979, “Inflation and the Stock Market,” Financial Analysts Journal 35, 24–44.

Rietz Thomas , 1988, “The Equity Premium Puzzle: A Solution?,” Journal of Monetary Economics 21, 117–132.

→ Ritter Jay R. Richard S. Warr , 2002, “The Decline of Inflation and the Bull Market of 1982 to 1997,” Journal of Financial and Quantitative Analysis 37, 29–61.

Rubinstein Mark , 1976, “The Valuation of Uncertain Income Streams and the Pricing of Options,” Bell Journal of Economics 7, 407–25.

→ Santos Manuel S. Woodford Michael , 1997, “Rational Asset Pricing Bubbles,” Econometrica 65, 19–57.

Sharpe Steven A. , 1999, “Reexamining Stock Valuation and Inflation: The Implications of Analysts' Earnings Forecasts,” Review of Economics and Statistics 84, 632–648.

→ Shiller Robert J. , 1981, “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?,” American Economic Review 71, 421–436.

Shiller Robert J. , 1982, “Consumption, Asset Markets, and Macroeconomic Fluctuations,” Carnegie–Rochester Conference Series on Public Policy 17, 203–238.

Shiller Robert J. , 2000, Irrational Exuberance, Princeton University Press, Princeton, NJ.

Siegel Jeremy , 1998, Stocks for the Long Run, 2nd ed., McGraw-Hill: New York, NY.

Sundaresan Suresh M. , 1989, “Intertemporally Dependent Preferences and the Volatility of Consumption and Wealth,” Review of Financial Studies 2, 73–88.

→ Thaler Richard H. Eric J. Johnson , 1990, “Gambling With the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice,” Management Science 36, 643–660.

→ Tirole Jean , 1985, “Asset Bubbles and Overlapping Generations,” Econometrica 53, 1499–1527.

→ Vissing-Jorgensen Annette , 2002, “Limited Stock Market Participation and the Elasticity of Intertemporat Substitution,” Journal of Political Economy 110, 825–853.

→ Wang Jiang , 1996, “The Term Structure of Interest Rates in a Pure Exchange Economy with Heterogeneous Investors,” Journal of Financial Economics 41, 75–110.

→ Weil Philippe , 1989, “The Equity Premium Puzzle and the Risk-Free Rate Puzzle,” Journal of Monetary Economics 24, 401–421.

Williams Burr John , 1938, The Theory of Investment Value, Harvard University Press: Cambridge, MA.