Tests of weak-form efficiency of the market for single family homes are performed using data on repeat sales prices of 39, 210 individual homes, each for two sales dates. Tests were done for Atlanta, Chicago, Dallas, and San Francisco/Oakland for 1970-86. While evidence for seasonality in real housing prices is weak, we do find some evidence of inertia in housing prices. A city-wide real log price index change in a given year tends to be followed by a city-wide real log price index change in the same direction (and between a quarter to a half as large in magnitude) in the subsequent year. However, the inertia cannot account for much of the variation in individual housing real price changes. There is so much noise in individual housing prices relative to city-wide price index changes that the R[squared] in forecasting regressions for annual real price change in individual homes is never more than .04.

Long historical averages of real earnings help forecast present values of future real dividends. With aggregate U.S. stock market data (1871–1986), a vector‐autoregressive forecast of the present value of future dividends is, for each year, roughly a weighted average of moving‐average earnings and current real price, with between two thirds and three fourths of the weight on the earnings measure. We develop the implications of this for the present‐value model of stock prices and for recent results that long‐horizon stock returns are highly forecastable.

Application of some advances in econometrics (in the theory of cointegrated vector autoregressive models) enables us to deal effectively with two problems in rational-expectations, present-valu e models: nonstationarity of time series and incomplete data on infor mation of market participants. With U.S. data, the authors find some relatively encouraging new results for the rational-expectations theo ry of the term structure and some puzzling results for the present-va lue model of stock prices.

This paper analyzes the correlation between interest rates and prices which as persisted for the past quarter of a millennium and has been termed the Gibson Paradox. Spectral techniques confirm the correlation between long-term interest rates and prices for very long-term swings (the Gibson Paradox), but indicate a significant short cycle correlation only for short-term interest rates, which we term the Kitchin Phenomenon. Past explanations of these correlations have often failed to distinguish cycle lengths and term of interest rates involved. Our analysis rejects Irving Fisher's "price expectation" explanation and the Sargent-Wicksell velocity of money explanations. We propose alternative explanations which in part relate to the characteristic behavior of governments during wartime and in part to distributional effects of unanticipated inflation. Our analysis strongly suggests that prior to World War I nominal long and short rates of interest can be regarded as real rates.

This paper analyzes the correlation between interest rates and prices which as persisted for the past quarter of a millennium and has been termed the Gibson Paradox. Spectral techniques confirm the correlation between long-term interest rates and prices for very long-term swings (the Gibson Paradox), but indicate a significant short cycle correlation only for short-term interest rates, which we term the Kitchin Phenomenon. Past explanations of these correlations have often failed to distinguish cycle lengths and term of interest rates involved. Our analysis rejects Irving Fisher's "price expectation" explanation and the Sargent-Wicksell velocity of money explanations. We propose alternative explanations which in part relate to the characteristic behavior of governments during wartime and in part to distributional effects of unanticipated inflation. Our analysis strongly suggests that prior to World War I nominal long and short rates of interest can be regarded as real rates.

Random samples of the Moscow and New York populations were compared in their attitudes toward free markets by administering identical telephone interviews in the two countries in May 1990. Although the Soviet respondents were somewhat less likely to accept exchange of money as a solution to personal problems and although their attitudes toward business were less warm, we found that the Soviet and American respondents were basically similar in some very important dimensions: in their attitudes toward fairness, income inequality, and incentives and in their understanding of the working of markets.