An intertemporal general equilibrium model relates financial asset returns to movements in aggregate output. The model is a standard neoclassical growth model with serial correlation in aggregate output. Changes in aggregate output lead to attempts by agents to smooth consumption, which affects the required rate of return on financial assets. Since aggregate output is serially correlated and, hence, predictable, the theory suggests that stock returns can be predicted based on rational forecasts of output. The empirical results confirm that stock returns are a predictable function of aggregate output and also support the accompanying implications of the model.

Discount window borrowing by weekly reporting banks disaggregated by Federal Reserve district is used to estimate Marvin Goodfriend's (1983) model of borrowed reserves. Little evidence is found to support the argument that a bank's borrowing decision is determined by the spread between the funds rate and the discount rate and by prior bank borrowing. A weekly reporting bank has only a 2.7 percent chance of visiting the discount window during any given maintenance period. This result is consistent with the presence of considerable harassment costs imposed by the discount window officer. Copyright 1994 by MIT Press.

In September 1999, the University of Notre Dame hosted a conference entitled “Measuring and Managing Ethical Risk: How Investing in Ethics Adds Value”. The motivations for hosting the conference and the papers presented there are summarized. Several themes that are present in the papers are discussed. These include the gains from combining the anthropological approach to business ethics with the neoclassical economics approach, the central role of trust in business ethics, the role of ethics in the corporation, and the function of the legal system in setting and enforcing ethical standards for the financial system.

ABSTRACT An intertemporal general equilibrium model relates financial asset returns to movements in aggregate output. The model is a standard neoclassical growth model with serial correlation in aggregate output. Changes in aggregate output lead to attempts by agents to smooth consumption, which affects the required rate of return on financial assets. Since aggregate output is serially correlated and hence predictable, the theory suggests that stock returns can be predicted based on rational forecasts of output. The empirical results confirm that stock returns are a predictable function of aggregate output and also support the accompanying implications of the model.

An intertemporal general equilibrium model relates financial asset returns to movements in aggregate output. The model is a standard neoclassical growth model with serial correlation in aggregate output. Changes in aggregate output lead to attempts by agents to smooth consumption, which affects the required rate of return on financial assets. Since aggregate output is serially correlated and hence predictable, the theory suggests that stock returns can be predicted based on rational forecasts of output. The empirical results confirm that stock returns are a predictable function of aggregate output and also support the accompanying implications of the model.

We present a new method for solving asset pricing models, which yields an analytic price-dividend function of one state variable. To illustrate our method we give a detailed analysis of Abel's asset pricing model. A function is analytic in an open interval if it can be represented as a convergent power series near every point of that interval. In addition to allowing us to solve for the exact equilibrium price-dividend function, the analyticity property also lets us assess the accuracy of any numerical solution procedure used in the asset pricing literature. Copyright The Econometric Society 2005.