Journal ArticleDOI
The Adjustment of Consumption to Changing Expectations about Future Income
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In this paper, the role of current income in providing new information about future income and signalling changes in permanent income is analyzed using time-series analysis to quantify the revision in permanent incomes induced by an innovation in the current income process.Abstract:
The paper analyzes the role of current income in providing new information about future income and thus signalling changes in permanent income Using time-series analysis to quantify the revision in permanent income induced by an innovation in the current income process, a structural econometric model of consumption is developed The rejection of the joint rational expectations-permanent income hypothesis is both statistically and quantitatively significant The paper also shows that the test of the rational expectations-permanent income hypothesis proposed by Hall is based on the reduced form of this structural model and reconciles Sargent's consumption paper with Hall'sread more
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Consumption and Liquidity Constraints: An Empirical Investigation
TL;DR: In this article, the authors test the permanent income hypothesis against the alternative hypothesis that consumers optimize subject to a well-specified sequence of borrowing constraints, and the results generally support the hypothesis that an inability to borrow against future labor income affects the consumption of a significant portion of the population.
Journal ArticleDOI
Capital markets research in accounting
TL;DR: This paper reviewed empirical research on the relation between capital markets and financial statements and found that the principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process.
Posted Content
No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns
TL;DR: In this paper, the generalized autoregressive conditionally heteroskedastic (GARCH) model of returns is modified to allow for volatility feedback effect, which amplifies large negative stock returns and dampens large positive returns, making stock returns negatively skewed and increasing the potential for large crashes.
Journal ArticleDOI
An analysis of intertemporal and cross-sectional determinants of earnings response coefficients
TL;DR: In this article, the authors predict and document evidence that the earnings response coefficient is a function of riskless interest rates and the riskiness, growth and/or persistence of earnings.
Posted Content
Saving and Liquidity Constraints
TL;DR: In this paper, the authors consider the problem of saving when consumers are not permitted to borrow, and the ability of such a theory to account for some of the stylized facts of saving behavior.
References
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Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
Robert E. Hall,Robert E. Hall +1 more
TL;DR: In this paper, the marginal utility of consumption evolves according to a random walk with trend, and consumption itself should evolve in the same way, and the evidence supports a modified version of the life cycle permanent income hypothesis.
Journal ArticleDOI
Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
TL;DR: In this article, the authors show that no variable apart from current consumption should be of any value in predicting future consumption, except real disposable income, which has no predictive power for consumption, but rejected for an index of stock prices.
The life cycle hypothesis of saving: aggregate implications and tests
Ando Albert,Modigliani Franco +1 more
Book
A theory of the consumption function
TL;DR: Friedman as discussed by the authors proposed a new theory of the consumption function, tested it against extensive statistical J material and suggests some of its significant implications, including the sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much they save.
Journal ArticleDOI
Optimal Properties of Exponentially Weighted Forecasts
TL;DR: The exponential weighted average can be interpreted as the expected value of a time series made up of two kinds of random components: one lasting a single time period (transitory) and the other lasting through all subsequent periods (permanent) as discussed by the authors.