2007

e-mail: dmalliaropoulos@eurobank.gr

:
: DNA ............................ 3
............................................................ 7
, ...............................................................11
.................................................................................................... 15
......... 41
............................................................................... 43
... 45
................ 50
................................................................................. 52
............................................................................ 55

................................................................................................................. 61
beta............................................................................. 66
..................... 68

; ........................................................................................................ 72
................................................... 73
.............................................................. 74
; ................................................................................. 81
: 84

..................................................................................................................... 86
.101
............................................105
Epstein-Zin.109
: ................................................................................................................ 119

: DNA


.
, , ;
;
;

.

: CAPM, ICAPM, APT
.


.
, 10-15

,
(Consumption Capital Asset Pricing Model, C-CAPM).

.


.


.

.

. ,

. ,
, ,
.

,


.

,
,
,

.

,
4

,
DNA CCAPM. ,
CCAPM
.
. ,
CAPM
CCAPM.
CCAPM
CAPM CCAPM.

CCAPM

.

:
=

.

Pt = E ( M t +1 X t +1 )
M t +1 = f ( , )
5

 P: , X: , :
.

f(.). ,
:

M t +1 = a + bFt +1
F ( ) .
F. ,
CCAPM : F = , c,
CAPM : F = ,
ICAPM : F = c + .

.

.
,
.


.
.

( )
. ,
.

,
( ) :

r = + + + z

(r ) =
()
+ ( )
+ ( )
+ ( z )

(..

) .

()
.

;
.

(marginal rate of substitution

(MRS) elasticity of intertemporal substitution (EIS) rate of time
preference).

10%

(0,10), 1
EUR , 1+0,10 EUR .

( 1)

Individual 2

Individual 1
Period 2

Period 2

I1

I2
C2

Y2

Y2

C2

1+r
Y1

C1

1+r
Period 1

Y1

C1

Period 1

Lending

Borrowing

Figure 1: Determination of real interest rate

,
,
( )

:
r = +

 ( ) .

r = + +

2.

Nominal interest rate (r)

Liquidity premium ()

Expected inflation ()

Real interest rate ()

Term to maturity

Figure 2: Decomposition of nominal interest rate

(CAPM, CCAPM, ICAPM, APT .).

: .

10

:
r = + + + z

3.

Nominal interest rate (r)

Risk premium

Liquidity premium ()

Expected inflation ()

Real interest rate ()

Term to maturity

Figure 3: Decomposition of nominal interest rate

F P

r T m.

F ()

F = P(1 + r ) T
: P = 1000

EUR,

r = 0,10
11

(10%),

T = 2

F = 1000(1 + 0,1) 2 = 1210

EUR

F m :

F = P(1 + mr ) mT
:

r = 0,10

(10%),

F = 1000(1 + 0,1 / 2) 4 = 1215, 51

T = 2 , m = 2

EUR

r = 0,1 (10%)
= (1 +

r m
m

1:

(1 + r )

1, 100000

(1 + 2r )2

1, 102500

(1 + 4r )4

1, 103813

(1 + 12r )12

1, 104713

(1 + 365r )365

1, 105156

F = P(1 + mr ) mT

12

( m )

F = Pe rT

e = lim (1 + m1/ r )

m/r

= 2, 71828.

e r = (2.71828) 0,1 = 1,105171

F T ,

P
F T .

.
()
P F T
:

P=

F
(1+ r )T

= F (1 + r ) T

: zero coupon

10% 5 1000 EUR

P = F (1 + r ) T = 1000(1 + 0,1) 5 = 620, 92 EUR

(1 + r ) T

13


m , P F
T :

P=

= F (1 + mr ) mT

F
(1+ mr ) mT

( m ) ,

P=

F
(1+ mr ) mT

= F (1 + mr ) mT
P = Fe rT

, d t t = 1,..., T ,

1
(1+ r )

P0 =

( )d

t =1

t
1
(1+ r )

: ,

d t t = 1,..., T , F
r , :
T

P0 =

( )d

t =1

t
1
(1+ r )

+ F (1 + r ) T

( )
( F).

14

P :
d:

r : ()

= 1+1r : ()

( ),
.

,
(r), , (r)=r. r :
r = + z ,

z :

d ( )

15

 (fair price);

= 1 ()
(fair price)
:

P0 =

E (d1 ) E ( P1 )
+
1+ r
1+ r

(1)

P0

E ( P1 )
E (d 1 )
r

1+ r .

(1),

,
.

= 2 ()

(1)

P1 =

E ( d 2 ) E ( P2 )
+
1+ r
1+ r

(2)

(2) (1)
P0 =

E (d1 ) E (d 2 )
E ( P2 )
+
+
2
1 + r (1 + r )
(1 + r ) 2
16

(3)

 = T ()

P0 =
t =1

E (d t )
E ( PT )
+
t
(1 + r )
(1 + r ) T

(4)

(4)
( )
( ).
.
:

:

P0

E ( PT )

(1+ r )T

E ( PT ) r

1: 1998-1999, NASDAQ 1998-2000.

.
(4), r o P.

90

.
o
. ,

17

 ( 7,5% 3%).
o
. ,
.

, T .
(4) :

P0 =
t =1

E ( PT )
E (d t )
+ lim
t
(1 + r ) T (1 + r )T

P0 =
t =1

E (d t )
(1 + r ) t

lim

(5)

(6)

( ) = 0.
E ( PT )

T
T (1+ r )

lim E ( PT ) < , .

(1 + r ) T T , r > 0.

(6)

r .

()

r = + z , ,

18

 z.

1 :
. (5) E (d t ) = 0,

t = 1,...,

P0 = 0.

2: r
.

, , r .

(6)

P0
.

P0 ,

.
d t .

19


1.

(random walk):

d t = d t 1 + t

(7)

: =0 .
(
( I 0 ) .
:

E (d1 / I 0 ) = E (d 0 + 1 / I 0 ) = d 0
E ( d 2 / I 0 ) = E ( d1 + 1 / I 0 ) = E ( d 0 + 1 + 2 / I 0 ) = d 0
...

E (d T / I 0 ) = E (d T 1 + T / I 0 )
= E (d 0 + 1 + 2 ... + ... T / I 0 ) = d 0

E ( 1 / I 0 ) = 0,

E ( 2 / I 0 ) = 0,

E ( 3 / I 0 ) = 0,...,

(6) (7) :

P0 =
t =1

= d0
t =1

20

d0
(1 + r ) t
1
(1 + r ) t

E ( T / I 0 ) = 0.

= d0
= d0

1
1

(1 + r ) t =0 (1 + r ) t

1
1
1
(1 +
+
+ ...)
(1 + r )
(1 + r ) (1 + r ) 2
= d0

1 1

(1 + r ) 1 1+1r

= d0

1 1+ r

(1 + r ) r

P0 =

d0
r

(8)

, .

r.

(7)

Pt ;

(1) E ( P1 / I o ) = (1 + r ) P0 E (d1 / I o ). (7)

E (d 1 / I o ) = d 0

(8)

d 0 = r P0 .

21

 :
E ( P1 / I o ) = (1 + r ) P0 rP0 = P0

E ( Pt / I o ) = P0 ,

, .

.

2. : Gordon

(
-- random walk with drift-- d t ):

E (d t ) = (1 + g )d t 1

E (d t ) = (1 + g ) t d 0
(6)

P0 = d 0
t =1

(1 + g )t
(1 + r )t

= d0 t
t =1

(1+ g )
(1+ r )

. ,

1
P0 = d 0 (1 + + 2 + ...) = d 0 (
)
1

22

(9)

= d0

1+ g 1

1 + r 1 11++gr

P0 = d 0

1+ g
rg

(10)

(10) Gordon.

(10),

23



1. Real Stock Price:
(S&P 500), P(t)*(CPI(2003)/CPI(t),
2. PDV constant discount rate:
.
PV(t)=RealD(t)+(PV(t+1)/(1+mean(R))),
RealD(t)=D(t)* (CPI(2003)/CPI(t)
mean(R)=exp(mean(ln(1+R(t)))
S&P 500. 2003 ( )
Gordon *D(2003)*(1+g)/(g-r),
(=1.25).
3. PDV interest rates:

.
PV1(t)=RealD(t)+(PV1(t+1)/(1+rf(t)+(mean(R)-mean(rf))),
RealD(t)=D(t)* (CPI(2003)/CPI(t) , rf
, mean(R)=exp(mean(ln(1+R(t)))
S&P 500
mean(rf)=mean(1+Rf(t)) .
2003 ( )
Gordon *D(2003)*(1+g)/(g-r), (=1.25).

24

10000

Real Stock Price (S&P 500)

1000

Price

PDV, Interest Rates

PDV, Constant Discount Rate

100

10
1860

1880

1900

1920

1940
Year

25

1960

1980

2000

2020

 Gordon
Gordon ( e )
.
.
(10) e ,
, ( : payout ratio).

d t = et

(11)

(11) (10) :

P0 = e0

1+ g
rg

(12)

(12), ( P / e) s

( r
).

;
(1) E ( P1 / I o ) = (1 + r ) P0 E (d1 / I o ).
(9) E (d1 / I o ) = (1 + g )d 0 .

26

 :
E ( P1 / I o ) = (1 + r ) P0 (1 + g )d 0

(10) :

P0 = d 0 1r+gg . :

E ( P1 / I o ) = (1 + r ) P0 (r g ) P0 = (1 + g ) P0 .

, E ( Pt / I o ) = (1 + g ) t P0 .
,

E (log( Pt / I o )) = log( P0 ) + tg .

g .

:
rt = t + z t

t = 1+1r

= 1 ().
(fair value)
:

Pt =

E ( d t +1 )
1+ rt +1

+ E1+( Prtt ++11 ) = t +1 ( E (d t +1 ) + E ( Pt +1 ))

= 2 ().

Pt =

E ( d t +1 )
1+ rt +1

+ E1+( Prtt ++11 ) = t +1 ( E (d t +1 ) + E ( Pt +1 ))

27

Pt +1 =

E ( dt + 2 )
1+ rt + 2

E ( Pt + 2 )
1+ rt + 2

= t + 2 ( E (d t + 2 ) + E ( Pt + 2 ))

Pt = t +1 E (d t +1 ) + t +1 t + 2 ( E (d t + 2 ) + E ( Pt + 2 ))

Pt = t +1 E (d t +1 ) + t +1 t + 2 E (d t + 2 )
+ t +1 t + 2 t +3 E (d t +3 ) + ...

Pt = t +i E (d t + j )
j =1 i =1

,
.

(''asset pricing models ''),

CAPM, Intertemporal CAPM, Consumption CAPM, APT

,
.
.

28

Campbel Shiller (1988)

,
.
:

Rt1

P t1 Dt1
Pt

:
1
1 R1
t1 Rt1 Rt1

P t1 Dt1
Pt

Pt / Dt :

P t1
Pt
R1
t1 1
Dt
Dt1

Dt1
Dt

( ):

p t d t r t1 d t1 ln1 e p t1 d t1

Taylor P / D = e p d .

29

: Taylor x0 :

fx t fx 0 f x 0 x t x 0 2 .
ln( y t ) = ln(1 + e xt ) ,

[ ln( y 0 ) / y 0 ][e x0 / x0 ] = [1 /(1 + e x0 )][e x0 ] = 1+PP/ /DD .

, 1 p-d :

p t d t r t1 d t1

P/D
p t1 d t1 p d
1 P/D

r t1 d t1 p t1 d t1 k

= 1+PP/ /DD k
.
, :

p t d t const. j d tj r tj
j1

lim j p tj d tj 0.

ex-post ex-ante. ex-ante :

p t d t const. E t j d tj r tj
j1

30


( ).
, Taylor
.
. ,
,
,
.

),
.

:
().

:

,
/

31

.
:

j d tj a d b d d t p t
j1

j rtj a r b r d t p t
j1

k = 1,..., K . (
),
t t + k :
k
k
d tj d tk d t ,
j d tj j1
j1
k
k
r tj p tk p t .
j r tj j1
j1

R 2

br ( )
.

R 2

, bd (
) .

, ,

32

 ,
( ).

(persistence),
. ,

. ,

R 2 . Valkanov (2003), Journal of Empirical
Finance, , t
.

,
.

,
( , )
.

[,

, Campbell and Ammer (1993), EJ , Malliaropulos

(1998), European Financial Management ].
:

33

.

.

34

 1948-1996

35

36

37



,
:

p t1 d t1 const. E t j d tj r tj
j0

t t-1 (innovations):

E t E t1 p t1 d t1 E t E t1 j d tj r tj
j0

=0. :

0 E t E t1 j d tj r tj
j0

( Et Et 1 )rt ,
:

r t E t1 r t E t E t1
unexpected return

d tj
j

j0

E t E t1

j rtj
j1

news about future dividends

38

news about future returns

 (
)

.

,

E t E t1 j1
j r tj

E t E t1 j1
j r tj E t E t1 j1 j r etj ,

e
r t r t

.
,
,
.


.

Campbell (1991) EJ, Campbell Ammer (1993), EJ, Malliaropulos

(1998), European Financial Management, ,

.

39

:
.
.
.


. ,

.

40

(Consumption Capital Asset Pricing

Model, CCAPM), ( )

- .

,
.

,

(payoff) .

:

payoff.

41

, ,
( , permanent income hypothesis).

(=
).

, . ,

.

,

( , ) ().

().

. ,
.

42

, X t +1 ,

t
t+1;

, , ,

(payoff) Dt +1 , Pt +1 ,
:

X t +1 = Pt +1 +

Dt +1

X t +1 , .

X t +1

, U,

, C:

U (Ct , Ct +1 ) = u (Ct ) + Et [u (Ct +1 )]

0 < < 1
E t (u ) u
t.

u (.)

, u > 0,

u < 0.

43

Yt and Yt +1.

< 1.

Pt

payoff X t +1 = Pt (1 + rt +1 ) = Pt Rt +1 , Rt +1 .

( );

max U = [u (Ct ) + Et [u (Ct +1 )]]

s.t. Ct = Yt Pt
Ct +1 = Yt +1 + X t +1

o U
, :

Pt u (Ct ) = Et [ u (Ct +1 ) X t +1 ]

(1)

Pt u (Ct ) :

Et [ u (C t +1 ) X t +1 : (, )

payoff .
(1) :

44

Pt = Et [

u (Ct +1 )
X t +1 ]
u (Ct )

(2)

(2) .

payoff,

, (2)
.

(stochastic discount factor, SDF)
:

M t +1 =

u (Ct +1 )
u (Ct )

(3)

(3),
.
:

(4)

Pt = Et ( M t +1 X t +1 )

1: SDF

45


. , u t = a + bCt ,

u (Ct ) = u (Ct +1 ) = a M t +1 =

u ( Ct +1 )
u ( Ct )

= aa = . ,

,
, Pt = Et ( X t +1 ) .
Pt ,
.

(power utility):

u (Ct ) =

1
Ct(1 )
(1 )

(5)

(CRRA: constant relative risk aversion).

(5), u (Ct ) = Ct . ,

u ( Ct +1 )
u ( Ct )

= ( CCt +t 1 )

(3) :

M t +1 = (

Ct +1
)
Ct

:
(4) Pt , :

Rt +1 =

X t +1
Pt

46

1 = Et ( M t +1 Rt +1 )

(6)

(6),

M t +1 .

, (=1
EUR)
.

, ,

1, M = , (6) =

1
Et ( Rt +1 )

= R1 ,

.
, .

47





.
W0 .
,
. t Ct
(
). , t + 1 : Wt +1 = Rtw+1 (Wt Ct ) ,
Rtw+1 .

2
:

max U (C ) = u (C t ) + E t u (C t +1 )
ct , ct +1

s.t. : Wt +1 = Rtw+1 (Wt C t )

, ,

C t +1 = Wt +1 .
,

max U = max{u (C t ) + E t u ( Rtw+1 (Wt C t )) }.

ct

ct

48

u (Ct ) + Et (u ' (Ct +1 ) Rtw+1 ) = 0.

, :

u (C t +1 ) w
Et
Rt +1 = 1.
u (C t )

i. :

u (C t +1 ) i
Rt +1 = 1.
Et
u (C t )

, . ,
(K x 1) Rt +1 :

u (C t +1 )

E t
Rt +1 = ik
u (C t )

ik (K x 1) .

49




, payoff :

X t +1 = Pt +1 + Dt +1 . (2),
P:

Pt = Et [ M t +1 ( Pt +1 + Dt +1 )]

M t +1 =

u (C t +1 )
.
u (C t )

Pt = Et (M t +1+ j Dt +1+ j ) + lim (Et ( M t +T Pt +T ) )

T

j =0

.

.
To
1871 2003
=3, . M t +1 = (

C t +1 3
)
Ct

(1) (2)
(= t + ).

50

10000

Real Stock Price (S&P 500)

1000

Price

PD, Interest Rates

PDV, Constant Discount Rate

PDV, Consumption

100

10
1860

1880

1900

1920

1940
Year

51

1960

1980

2000

2020


(4)
;

payoff

Rt f+1 = 1 + rt +f 1 t + 1, rt +f 1 .

" " t ,

. .

, Pt = Et ( M t +1 X t +1 ) :
1 = E ( M t +1 Rt f+1 ) = E ( M t +1 ) Rt f+1
Rt f+1 =

1
E t ( M t +1 )

:
1. .

, , (6)

M t +1 , :

Rt f+1 =

Et (

C t +1
)
Ct

(7)

:
ct +1 = ln(C t +1 / C t ) rt +f 1 = ln Rt f+1

(7) :

52

rt f = ln + Et ct +1

(7)

, . .

. , , C t ,
, C t +1 , , .
.

2. .


.

2 ), E (e z ) = e

z N ( ,

rt +f 1 = ln + Et ct +1

2
2

2c ,t

+ 12 2

. :

(8)

E t ct +1 2c ,t
,
t.

(8) (7) 2 2c ,t .
2

53

(
) ,
.

,
.

M t +1 Rt +1
:

log Et (M t +1 Ri ,t +1 ) = 0

1
, log Et ( X t +1 ) = Et ( xt +1 ) + Vart ( xt +1 ) ,
2
xt +1 = log( X t +1 ) . , M t +1 Ri ,t +1

1
log Et (M t +1 Ri ,t +1 ) = Et mt +1 + Et ri ,t +1 + Var (mt +1 + ri ,t +1 ) = 0
2

mt +1 = log( ) c t +1

,
.

54

 (8):
M t +1 R t f+ 1 ,

1
log Et M t +1 Rt f+1 = Et mt +1 + Et rt +f 1 + Vart mt +1 + rt +f 1 = 0
2
t Et rt +f 1 = rt +f 1

( )

Vart rt +f 1 = 0 . mt +1 = log( ) c t +1
rt +f 1 , (8).

:
(9)

cov(M , X ) = E ( MX ) E ( M ) E ( X )
(2):

Pt = Et [ M t +1 X t +1 ]

Pt = Et ( M t +1 ) Et ( X t +1 ) + cov t ( M t +1 , X t +1 )

Rt f+1 =
:

Pt =

Et ( X t +1 )
+ cov t ( M t +1 , X t +1 )
Rt f

55

(10)

1
Et ( M t +1 )

(10) .

(..
,

).

(10)

. payoff
SDF
payoff
SDF.

(SDF). SDF :

M t +1 = (

Ct +1
)
Ct

(10), :
Pt =

E ( X t +1 )
C
+ cov( ( t +1 ) , X t +1 )
f
Ct
Rt

(11)

, payoff
.
payoff .

56

payoff

,
.
.

, .. .
,

(6)

1 = Et ( M t +1 Rt +1 )

Rt +1 =

X t +1
Pt

cov(M t +1 , Rt +1 ) = E ( M t +1 Rt +1 ) E ( M t +1 ) E ( Rt +1 )
(6) :

57

1 = E ( M t +1 ) E ( Rt +1 ) + cov(M t +1 , Rt +1 ) (12)

, Rt f+1 =

1
E ( M t +1 )

E ( Rt +1 ) Rt f+1 = Rt f+ cov(M t +1 , Rt +1 )

(13)

E ( Rt +1 ) Rt f+1 = Rt f+1 cov(

u (C t +1 )
, Rt +1 )
u (C t )

(14)

,

.

, ..
,
. (14) :

E ( Rti+1 ) Rt f = cov t (ct +1 , Rti+1 )

(15)

, ()

, () .

58

().

,
.

.
.

E t ( Rt +1 ) = Et ( X t +1 ) / Pt , payoff,
() () .

Stein:
xt , y t f t

y t = g ( f t ). xt f t

, g

Et ( g ) < ,

cov t x t1 , gf t1 E t g cov t x t1 , f t1

(15) (13)
(15)

M t +1 =

( )

C t +1
Ct

= e ln ( ) e ln ( Ct +1 / Ct ) = e ln ( ) ct +1 .

59

 Stein:

((

cov(M t +1 , Rti+1 ) = cov t

Ct +1
Ct

, Rti+1 = Et ( M t +1 ) cov t (ct +1 , Rti+1 ).

i

E ( Rti+1 ) Rt f = cov(EM( Mt +1t +,1R)t +1 ) , : E ( Rti+1 ) Rt f = cov t (ct +1 , Rti+1 ).

60

2:

1871-1999

1926-1999

. .

. .

ln(1 + R)

0.090

0.167

0.105

0.182

ln(1 + r f )

0.047

0.026

0.046

0.033

ln(1 + )

0.018

0.075

0.030

0.044

0.109

0.177

0.129

0.192

rf

0.049

0.028

0.048

0.035

0.021

0.075

0.031

0.045

: R : ,

r f :

, : .

61

 3:

1871-1999

Re

0.057

. .

0.181

1926-1999

Re

0.079

0.195

62

 1927-2002.

( ) 1947-1996

63

 () 1927-2002

1.1

7.7

8.6

20.8

2002 1927:

: 1 x (1+0.07+0.011)(2004-1927) = 574

1 x (1+0.011)(2004-1927)

64

= 2.3

 4: SDF

1871-1999

1
1+ r f

0.974

. .

0.076

1926-1999

1
1r f

0.985

. .

0.046

1
1+ r f

1 = E ( MR f )

1 EMERf covM, Rf
0

1 = E ( MR f ) E ( M ) = E ( 1+1r f ) 0.974,

var(M ) = var(1+1r f ) 0.076.

65

 beta
:
.
(13), :
E ( Rti+1 ) = Rt f

(14243)(14243)
cov( M t +1 , Rti+1 )
var( M t +1 )

var( M t +1 )
E ( M t +1 )

i , m

(16)

E ( Rti+1 ) = Rt f i , m m

i, m Rti+1 M t +1 .

(16) beta (beta pricing model).

(16),

i = 1,..., N ,

beta ( ) .

beta , m

, .
, M t +1 = (Ct +1 / Ct ) , (16)
:

E ( Rti+1 ) = Rt f + i , c c

(16)

c = var(ct +1 ),
i , c =

cov(Rti+1 , ct +1 )
var(ct +1 )

(16),

66

 beta .

, , .

, ( )

( ( c))
.

67

(mean variance

frontier)
.

1 = Et ( M t +1 Rti+1 ) = E ( M t +1 ) E ( Rti+1 ) + cov(M t +1 , Rti+1 )

1 = E ( M t +1 ) E ( Rti+1 ) + M , R ( M t +1 ) ( Rti+1 )

E ( Rti+1 ) Rt f = M , R

( M t +1 )
E ( M t +1 )

( Rti+1 )

(17)

1 M , R 1,

| E ( Rti+1 ) Rt f |

( M t +1 )
E ( M t +1 )

( Rti+1 )

(18)

(18)

68

E ( Rti+1 ) ( Rti+1 )

4.

A
(R)

Mean variance frontier

of risky assets
Tangency portfolio

Rf

(R)

Figure 4: Mean-variance frontier

AR f B

, (17) M , R = 1.

AR f B

AR f

, . .

69

R f B

, . .

.

.
R mv

AR f B

, ..
R mv = R f + a ( R m R f )

a.

( Sharpe ratio)

.
Sharpe ratio:
E ( Rt +1 ) Rt f

( Rti+1 )

= Sharpe ratio

mean-variance frontier Sharpe ratio

. :

( M t +1 )
E ( Rt +1 ) Rt f
=
= ( M t +1 ) Rt f
i
E ( M t +1 )
( Rt +1 )

70

(19)

 (19), Sharpe ratio

.

Sharpe ratio
. :

M t +1 = (C t +1 / C t ) . (19)

E ( Rt +1 ) Rt f ( M t +1 )
=
(ct +1 )
E ( M t +1 )
( Rti+1 )

(20)

Sharpe ratio

c ), .

71

0 = E ( MR e )

0 EMERe covM, Re
0
e

E ( R e ) = cov(E M( M, R) ) = ( M , R E)( M( M) ) ( R )
E ( Re )

( Re )
E ( Re )

( Re )

= ( M , R e ) E (( MM ))

(M )
E (M )

0.974

0.057

0.181
{

(M )

Sharpe ratio

0.974 0.313 = 0.305 ( M )

M = 0.305
M = (0.305 ) 2 = 0.093.

72

CCAPM , Sharpe ratio

. (10) (20)

E ( Rt +1 ) Rt f
(ct +1 )
( Rti+1 )

(21)

Sharpe ratio (ct +1 ).

(21), .

, 50

9%,
1%
16%. ,

E ( Rt +1 ) Rt f

( Rti+1 )

0.09 0.01
0.16

= 0.5.

1%.

(21),

, , 50.

equity premium puzzle

Mehra Prescott (1985).

73


,
,
,
.
.
,

rt +f 1 = ln + Et ct +1

2
2

(8)

1948-2002
( , . x 100, Corr(c,r)
Cov(c,r))
(c)

(c)

(r-rf)

(R)

(rf)

Corr(c,r) Cov(c,r)

1.31

1.93

7.21

18.0

1.0

0.40

0.14

, =50 (8)

rt +f 1 + ln = 0.204

1.
, .. =0.97, ln(0.97)=-0.03. ,

74

 17%
(=0.20-0.03). 17% +
. ,
.
2. (1%),
=1.17 (=exp(0.204-0.01),
17%
.
.

,
.
, =50

50 ( 17% 67%),
.

:
1) .
2)
.
3)
( peso).
4) CCAPM () .

75

 1.
. .

2.

(
). ,
.
,
. , ...
.

(Brown, Goetzmann and Ross,
1995).
... , Jorion Goetzmann
(1999)
20 .
3.
.
.
peso problem
.
(
) ().
,

76

 .
, (1 2, )
1 (2)
(R1) ((R2)) (1) ((2))
t
1 (2) (1-),

E t ( Rt +1 ) = ( R1 ) + (1 )( R2 )

M =90% (R1)=8%, (R2)=-30%, 5.2%

(0.9*8+0.1*(-30)). 2 ,
8%, .
,
, . 5.2%, .

,
.

Et ( 2 t +1 ) = 2 21 + (1 ) 2 2 2

, =90% 1=18%, 2=70%,

( ) 23.2% (0.9*18+0.1*70). 2
, 18%,
.
,
, 23.2% 18%.
77

 , ()
(Sharpe ratio) ()
. To Sharpe ratio (. Sharpe ratio
) 0.22 (=5.2%/23.2%) 0.44
(8%/18%)

.


. peso problem
,
SDF.

1930,
...
4. CCAPM
.

, .
20 .
CCAPM . ,
.

78

1.
(non-separability)
.
. ,


. ,

, Campbell Cochrane (2000)
.
2. Constantinides Duffie
(1996).
, .

( )
.
( ,

), .

, .
3. (production economy) Cochrane (1991).


.
79

 .
, Cochrane (1997).
(20) :
(20):
E ( Rt +1 ) Rt f ( M t +1 )
=
(ct +1 )
E ( M t +1 )
( Rti+1 )

(20)
:
i

E ( Rti+1 ) Rt f = cov(EM( Mt +1t +,1R)t +1 ) . ,

M t +1 =

( )

Ct +1
Ct

= e ln ( ) e ln (Ct +1 / Ct ) = e ln ( ) e ct +1 .

Stein:

Stein:
xt , y t f t

y t = g ( f t ). xt f t

, g
Et ( g ) < ,

cov t x t1 , gf t1 E t g cov t x t1 , f t1
Stein:

((

cov(M t +1 , Rti+1 ) = cov t

Ct +1
Ct

, Rti+1 = Et ( M t +1 ) cov t (ct +1 , Rti+1 ).

i

E ( Rti+1 ) Rt f = cov(EM( Mt +1t +,1R)t +1 ) , : E ( Rti+1 ) Rt f = cov t (ct +1 , Rti+1 ).

cov t (ct +1 , Rti+1 ) = (c, R) (ct +1 ) ( Rti+1 ), :
E ( Rti+1 ) Rt f

( Rti+1 )

= (c, R ) (ct +1 ). , (c, R) = 1

80

E ( Rt +1 ) Rt f

( Rti+1 )

(ct +1 ) .

, ,
;
(1):

Pt u (Ct ) = Et [ u (Ct +1 ) X t +1 ]

:
1) payoff , X t +1 = Pt +1 (
),
2) risk neutral, . , u (C ),
( Et [Ct +1 ] = Ct ),
3) t t + 1 , . =1
:

(22)

Pt = Et [ Pt +1 ]

(22), .

81

martingale,
.

martingale random walk.

(23)

Pt +1 = Pt + t +1

E ( ) = 0,

var( ) =

2.

(23)
.

, 1-3 (
< 1). :

E ( Rti+1 ) Rt f = covtE( M( Mt +t1+,1R) t +1 )

=

t ( M t +1 )
Et ( M t +1 )

t ( Rt +1 ) t ( M t +1 , Rt +1 )

= t t (ct +1 ) t ( Rt +1 ) t (ct +1 , Rt +1 )

:
1) ( t ),
2) ( t (ct +1 ) ),
3) ( t ( Rt +1 ) ),
4)
( t (ct +1 , Rt +1 ) ).

82

,

.

83

U (C ) = Et j u (C t + j )
j =0

P t
Dt + j t + j .
, :

Pt = Et
j =1

u (C t + j )
u (C t )

Dt + j
(24)

= Et M t + j Dt + j
j =1

E t ( M t + j Dt + j ) = Et ( M t + j ) Et ( Dt + j ) + cov t ( M t + j , Dt + j ),
(24) :

84

Et Dt + j

j =0

Rt f, t + j

Pt =

+ cov t ( Dt + j , M t + j )

(25)

j =0

Rt f, t + j = Et ( M t + j ) 1

(25) :
1)

j :
j =0

Et Dt + j
Rt f, t + j

( ).
2) : j =0 cov t ( Dt + j , M t + j ).
payoff

payoff .

85

, P = E (MX ),
:

(35)

E ( Rti+1 ) = Rt f i , M M

i, M (beta)

Rti+1 M t +1 .
i, M
. M
(
) .
,


beta
.

86


;
.

CAPM, ICAPM, APT .


.
.
,

, Consumption-CAPM,
.
C-CAPM

.
,

. ,

.

87

M a bf ; Ef 0, 0 EMRe

f (, factor) ,
, R e

(R e = R i R f )

(factor model):
ERe

= cov( f , R e ) / var( f ) beta

R e f
= ba var( f ).

:
:

0 EMRe EMERe covM, Re

aERe bcovf, Re
ERe ba covf, Re .
= cov( f , R e ) / var( f )
e

f ,R )
E ( R e ) = ba var( f )( cov(
var( f ) ) =
1
424
3 123
=

88

:
M = 1 + b [ f E ( f )]; 0 = E ( MR e )

f ()
E ( f ) = 0, b , R e
( R e = R i R f ) (multi-factor

model):
ERe

beta
R e f
.

E ( MR) = 1
(MRS) .
,

.
.
1 2

89

 . , M ,

. ,

M t +1 = MRS =

u (Ct +1 )
= a + bf t +1
u (Ct )

(36)

(MRS) f.

.
. ,


, , ,
.
.

, MRS

MRS .
. ,

, ct +1 = g ( f t +1 ) ,
.

90

E t Rit1 Rt

cov t M t1 ,R it1
.
E t M t1

, M t +1 =

( )

Ct +1
Ct

, ct +1 = g ( f t +1 )

) g ( f t +1 )), Rt +1 )
: Et ( Rti+1 ) Rt f = covEt (texp(ln(
(exp(ln( ) g ( f t +1 )) )
i

Stein:

cov t Ff t1 , Rit1 E t F cov t Rit1 , f t1

F = exp(ln( ) g ( f t +1 ))
:
f

E t Rit1 Rt E t g cov t Rit1 , f t1

, :
f

E t Rit1 Rt f i,f
f = Et ( g ) vart ( f ),
i , f = cov t ( Rti+1 , f t +1 ) / vart ( f ).

91


(CAPM)
CAPM
:

(37)

Et ( Rti+1 ) = Rt +1 + t i , w,t
f

t ( )

i , w,t = cov( Rti+1 , Rtw+1 ) / var(Rtw+1 ) (

).

SDF, CAPM :

(38)

M t +1 = a bRtw+1

b .

:
Et ( Rti+1 M t +1 ) = 1 Et ( Rti+1 ) R f = R f cov t ( Rti+1 , M t +1 ).
M t +1 (38) :

Et ( Rti+1 ) R f = R f b cov t ( Rti+1 , Rtw+1 ).

var(Rtw+1 ) :

Et ( Rti+1 ) = R f + i , w , = bR f var(Rtw+1 )

i , w = cov( Rti+1 , Rtw+1 ) / var(Rtw+1 ).

92

 b
.
. CAPM
.
b
,
. ,

Et ( M t +1 ) R f = 1

(39)

Et ( Rtw+1 M t +1 ) = 1

(38) (39) ,
:

1
+ bEt ( Rtw+1 )
Rf
E (R w ) R f
b = t f t +1 w
R var( Rt +1 )

a=

Et ( Rtw+1 ) R f , , b .

, CAPM,
,
(CCAPM),
. , CAPM
CCAPM :

93

1
1
u (Ct , Ct +1 ) = (Ct C ) 2 Et (Ct +1 C ) 2
2
2

(40)

C .


.
(MRS) :

Mt1

u C t1
C t1 C

C t C
u C t

, -

Wt . t
Ct
. , , t + 1 ,

94

: Wt +1 = Rtw+1 (Wt Ct ) , Rtw+1

. , t + 1,
: Ct +1 = Wt +1 .

, :

(Ct +1 C )
Rtw+1 (Wt Ct ) C

=
(Ct C )
(Ct C )

M t +1 =

(Ct C )

(Wt Ct )

(Ct C )

Rtw+1

(41)

= at bt Rtw+1

at = ( CCC ) ,
t

bt = ( C(Wt CC t)) .
t

.

.
.
:

M t +1 =

u (Ct +1 )
u ( Rtw+1 (Wt Ct ))
= g ( Rtw+1 )
=
u (Ct )
u (Ct )

95

(42)

Et ( Rti+1 ) Rt f =

cov t ( M t +1 , Rti+1 )
Et ( M t +1 )

(43)

,
Stein cov t ( M t +1 , Rti+1 ), M t +1 = g ( Rtw+1 ) :

cov t ( M t +1 , Rti+1 ) = cov t ( g ( Rtw+1 ), Rti ) = E [g ]cov t ( Rti+1 , Rtw+1 )

(W Ct ) u ( Rtw+1 (Wt Ct ))
i
w
= Et t
cov t ( Rt +1 , Rt +1 )

u
(
C
)
t

u (Ct +1 )
cov t ( Rti+1 , Rtw+1 )
= (Wt Ct ) Et

u (Ct )
= (Wt Ct ) Et ( M t +1 ) cov t ( Rti+1 , Rtw+1 )

(44) (43) CAPM:

E t ( Rti+1 ) Rt f = (Wt C t ) cov t ( Rti+1 , Rtw+1 )

= t i , w ,t

t = (Wt C t ) var( Rtw+1 ),

i , w,t = cov( Rti+1 , Rtw+1 ) / var( Rtw+1 ).

96

(44)


, u (Ct ) = ln(Ct ),

:

UC E t j uC tj
j0

Pt w
.
Dt + j t + j .
, . Dt + j = Ct + j .

, :

Pt w = E t
j =1

u (C t + j )
u (C t )

Ct + j

, u (Ct ) = 1 / Ct ,
:

Pt w = E t
j =1

Ct

Ct + j =
Ct
1
Ct + j

(45)

(45),
.

,
97

 : Rtw+1 =

Pt w+1 + Ct +1
Pt w

w
. P t

Pt +w1 (45) :

u C t
C
w
Rt1
1 t1 1
M1
t1
Ct
u C t1

SDF :

M t1

1
w
Rt1

CAPM,
Taylor E ( R w ) :

1
1 Rw ERw
w
ER ERw 2 t1
2
1 Rw

ERw ERw 2 t1

M t1

a bRwt1

98

 CAPM (ICAPM)
(Intertemporal) CAPM Merton
CCAPM
(state variables), z t ,
.
,
.
z t ,
,
z t . , value function :

VWt , z t max
ct

uC t E t

max E t1

c t1 ,...,c

j uC tj
j1

max uC t E t VWt1 , z t1
ct

M t +1 =

VW (Wt +1 , z t +1 )
VW (Wt , z t )

(46)

envelope condition u (Ct ) = VW (Wt , z t )

.
,

99

 (46):

Mt1 a b 1 Rwt1 b 2 z t1

Et ( Rti+1 ) = Rt f + 1 i , w + 2 i , z

(47)

(47) CAPM Merton. (47),

z t .

100

 CCAPM
equity premium puzzle

/.
CCAPM
.
, ()
, ()
()
. ,
:
,
.

:

.
,
. Campbell Mankiw

101

 , Brav,
Constantinides Geczy,

. Heaton Lucas
,
.



. (
, )

, CAPM Merton.

, .
,
-Bills,

.

102

 ,
.
Jensen.
,
.

.

Constntinides Duffie k
Ckt .

t t+1
t.

.

.
M

*
t +1

SDF. ,
tRA
+1
.
:
m *t +1 - m tRA+ 1 =

( + 1)
2

Var *t +1 c k ,t +1

Var *t +1 t+1.

103



. Constantinides Duffie

.

20%,
0,04
equity premium puzzle.

Var *t +1 c k ,t +1

( + 1)
2

,
equity premium puzzle.

104

t+1 t.
, CAPM
i, Et ( Rti+1 ) Rt +1 ,
f

, E t ( Rtw+1 ) Rt +1 :
f

Et ( Rti+1 ) Rt +1 = i , w,t ( Et ( Rtw+1 ) Rt +1 )

f

(37)

i , w,t = cov( Rti+1 , Rtw+1 ) / var( Rtw+1 ) beta , .

.
(37)

. ,

E ( Rti+1 ) Rt +1 = i , w ( E ( Rtw+1 ) Rt +1 )
f

Rte+,1i = i , w Rte+,1w

105

(37)

 Rte+,1i Rte+,1w

i , w = cov( Rte+,1i , Rte+,1w ) / var(Rte+,1w ) beta, .

.

(37)

.

(. (37)
)
beta
, (37)
.

, beta
z, (37)

z.

,
CAPM (37)
(52)

i , w ,t = f i ( z t )

zt

106

 , .

cov( z t , Rtw+1 ) 0 .
,
, . (52)
i (beta)
z. ,
,


.

(52) (37) ,
Rte+,1i = i , w Rte+,1w + E ( f i ( z t ) Rte+,1w )

(53)

Stein E ( f i ( z t ) Rte+,1w ) ,

(54)

Rte+,1i = i , w Rte+,1w + z , w i

z , w = cov( z t , Rte+,1w ) / var( Rte+,1w ) beta

zt, ,

i = E ( f i ' ( z t )) var(Rte+,1w ) z,

.

, k zt
(kx1)

107

(37) k+1
Rte+,1i = i , w Rte+,1w + ' z , w

(55)

z, w (kx1) betas k
(kx1)
.

108


Epstein-Zin


, , =1/.
Epstein Zin (1989) Weil (1989)
(recursive utility) .
:
1

Ut 1 Ct EtUt1 1

1
, 0 0
1
1

.
( > 1, > 1 < 0 ).

: =1, Epstein-Zin
(=1/). =1/=1,
.

Epstein Zin (1989):

109

C
(1 )

t +1

Rw,t +1
Ri ,t +1 = 1
Et
C t

mt +1 = log( )

ct +1 + ( 1)rw,t +1

log Et (M t +1 Ri ,t +1 ) = 0

1
, log Et ( X t +1 ) = Et ( xt +1 ) + Vart ( xt +1 ) ,
2
xt +1 = log( X t +1 ) . , M t +1 Ri ,t +1

1
log Et (M t +1 Ri ,t +1 ) = Et mt +1 + Et ri ,t +1 + Var (mt +1 + ri ,t +1 ) = 0
2
mt +1 = log( )

ct +1 + ( 1)rw,t +1

,
:
1

E t (ri ,t +1 ) + Vart (ri ,t +1 ) = log( ) + Et (ct +1 ) + (1 )rw,t +1

2

Vart (ct +1 ) + ( 1) 2 Vart (rw,t +1 ) + Covt (ri ,t +1 , ct +1 ) + (1 )Covt (ri ,t +1 , rw,t +1 )

Covt ( xt +1 , y t +1 ) = Covt ( xt +1 Et xt +1 , y t +1 Et y t +1 ) .

110

T t
t+1:

E t (r t +1 ) = log( ) + Et (ct +1 ) + (1 )rw,t +1 +

Vart (ct +1 ) + ( 1) 2 Var (rw,t +1 )

, :

E t rie,t +1 + Vart (ri ,t +1 ) = Covt (ri ,t +1 , ct +1 ) + (1 )Covt (ri ,t +1 , rw,t +1 )

( )

rie,t +1 i
.

1:

1
Vart (ri , t +1 )
2

Jensen.
Jensen
,
1
log Et ( X t +1 ) = Et ( xt +1 ) + Var ( xt +1 ) , xt +1 = log( X t +1 ) .
2

, Jensen log E t ( X t +1 ) > E t ( xt +1 ) .

111


v:

().
Epstein-Zin
CCAPM CAPM.
2:
=1, CCAPM.

.
.
:

(1) (CCAPM) .

CAPM
( )

.
(2) .

.
CCAPM

112

 ,

.

CCAPM Merton
(1973) ,

( , .).

.

-- Campbell (1993, 1996)
Campbell (1993, 1996)

.
Wt +1 = Rtw+1 (Wt Ct ) .

ct +1 = k + rw,t +1 + (1 ) j rw,t +1+ j k

j =1

.

.

113

 . ,
, ( Et +1 Et )ct +1 ,

( Et +1 Et )ct +1 = ( Et +1 Et )rw,t +1 + (1 )( Et +1 Et ) j rw,t +1+ j

j =1

, ( Et +1 Et )ct +1 > 0 ,
, ( Et +1 Et )rw,t +1 > 0 ,

, ( Et +1 Et ) j rw,t +1+ j
j =1

,
CCAPM (Consumption CAPM
without consumption data).

E t rie,t +1 + Vart rie,t +1 = + (1 ) Covt (ri ,t +1 , rw,t +1 ) + (1 )Covt (ri ,t +1 , ht +1 )

2

( )

( )

ht +1 = ( Et +1 E t ) j rw,t +1+ j
j =1

t t+1 .
: ()
()
( ,
).
Merton
(1973).

114

 Campbell ,

ht +1 = ( Et +1 E t ) j rw,t +1+ j VAR

j =1

Bansal Yaron (2004)
CCAPM
, . . Bansal Yaron (2004)
.

ARIMA(1,1).
.
Fama
.
(permanent
income hypothesis)
.

Bansal Yaron (2004)

,

115


.

. ,


.

Bansal Yaron (2004)

ct +1 = xt + t +1
xt +1 = xt + u t +1

xt
. xt ,


.

Bansal Yaron (2004), x
c:

ct +1 = t +1 +

ut
= t +1 + u t + u t 1 + 2 u t 2 + ...
1 L

116

 t x 1 , u t = 1 , u pt = 0 .
:
Et ct +1 = 1
Et ct + 2 =
Et ct +3 = 2

...
Et ct +1+ j = j

E c
j =0

t +1+ j

= 1 + + 2 + ... =

1
1

p 1 , ,
. , x
x
(persistence).
t.
x t+1,
.

1. mt +1 = log( )

ct +1 + ( 1)rw,t +1

ct +1 ,

2.
rw,t +1 = 0 + 1 z t +1 z t + ct +1 , z t
(
,

117

 ), 0
1
,
3. z t = A0 + A1 xt ,
4. mt+1
Et (mt +1 + rw,t +1 ) = 0 .
5. = 0
xt , xt

= 0 A0 , A1 .
6. , E t (mt +1 + ri ,t +1 ) = 0

1
E t r e i ,t +1 + Vart (ri ,t +1 ) = B1Covt (ri ,t +1 , t +1 ) + B2 Covt (ri ,t +1 , u t +1 )
2

B1 B2
, , .
: ()
, Covt (ri ,t +1 , t +1 ) , ()
, Covt (ri ,t +1 , u t +1 ) .

118

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Annual Data on US Stock Market

Available from Robert Shiller, http://www.econ.yale.edu/~shiller/data. site
2003.

Prices, Dividends, Earnings, 1871-present

with Associated Interest Rate, Price Level and Consumption Data
The Following is Chapter 26 (Data Appendix) from Robert J. Shiller, "Market Volatility," MIT Press, Cambridge
MA, 1989, with most series updated:

26. Data Series

Tables 26.1 and 26.2. Basic Data
Year

1871
1872
1873
1874
1875
1876

Series 1
Stock
Prices
January
4.44
4.86
5.11
4.66
4.54
4.46

Series 2
Dividends

Series 3
Earnings

Series 4
Interest

0.26
0.30
0.33
0.33
0.30
0.30

0.40
0.43
0.46
0.46
0.36
0.28

6.35
7.81
8.35
6.86
4.96
5.33

123

Series 5
Series 6
PPI
PPI
1982=100
1967=100
January Annual Avg.
15.39
44.10
15.62
45.70
15.98
45.40
15.27
43.40
14.21
40.60
13.39
37.60

Series 7
PPI
1967=100
44.10
45.70
45.40
43.40
40.60
37.60

Series 8
Consumption
Deflator

Series 9
Real Consumption

1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937

3.55
3.25
3.58
5.11
6.19
5.92
5.81
5.18
4.24
5.20
5.58
5.31
5.24
5.38
4.84
5.51
5.61
4.32
4.25
4.27
4.22
4.88
6.08
6.10
7.07
8.12
8.46
6.68
8.43
9.87
9.56
6.85
9.06
10.08
9.27
9.12
9.30
8.37
7.48
9.33
9.57
7.21
7.85
8.83
7.11
7.30
8.90
8.83
10.58
12.65
13.40
17.53
24.86
21.71
15.98
8.30
7.09
10.54
9.26
13.76
17.59

0.19
0.18
0.20
0.26
0.32
0.32
0.33
0.31
0.24
0.22
0.25
0.23
0.22
0.22
0.22
0.24
0.25
0.21
0.19
0.18
0.18
0.20
0.21
0.30
0.32
0.33
0.35
0.31
0.33
0.40
0.44
0.40
0.44
0.47
0.47
0.48
0.48
0.42
0.43
0.56
0.69
0.57
0.53
0.51
0.46
0.51
0.53
0.55
0.60
0.69
0.77
0.85
0.97
0.98
0.82
0.50
0.44
0.45
0.47
0.72
0.80

0.30
0.31
0.38
0.49
0.44
0.43
0.40
0.31
0.27
0.33
0.36
0.26
0.30
0.29
0.34
0.37
0.26
0.16
0.25
0.21
0.31
0.35
0.48
0.48
0.50
0.63
0.53
0.49
0.67
0.76
0.66
0.58
0.76
0.73
0.59
0.70
0.63
0.52
0.88
1.53
1.28
0.99
0.93
0.80
0.29
0.69
0.98
0.93
1.25
1.24
1.11
1.38
1.61
0.97
0.61
0.41
0.44
0.49
0.76
1.02
1.13

5.03
4.90
4.25
5.10
4.79
5.26
5.35
5.65
4.22
4.26
6.11
5.02
4.68
5.41
5.97
3.93
8.52
3.32
3.09
5.76
3.44
3.55
3.36
4.64
4.30
4.72
5.50
4.34
4.17
5.47
6.23
5.32
3.65
5.26
4.00
4.35
5.65
4.64
3.65
3.64
4.25
5.98
5.56
7.30
7.44
4.58
4.96
4.34
3.87
4.28
4.26
4.64
6.01
4.15
2.43
3.36
1.46
1.01
0.75
0.75
0.88

124

13.51
11.40
10.22
12.33
11.63
12.57
12.33
11.40
10.22
9.87
9.87
10.34
9.87
9.40
9.63
9.05
9.75
8.46
8.11
8.22
7.99
8.22
8.34
9.75
9.52
9.75
10.69
10.22
10.46
10.46
10.93
10.69
11.04
12.22
11.40
11.28
12.10
11.80
11.80
13.30
17.60
21.60
23.20
27.20
19.60
15.70
17.60
17.20
17.70
17.80
16.40
16.60
16.50
15.90
13.50
11.60
10.50
12.40
13.60
13.90
14.80

36.70
33.20
31.80
35.50
34.40
35.00
33.10
30.10
27.80
27.30
27.50
28.30
27.30
26.70
26.30
24.70
25.30
22.70
23.00
22.00
22.00
23.00
24.70
26.80
26.00
26.50
27.90
27.20
27.40
29.00
30.70
30.20
29.80
31.90
31.00
31.40
33.90
33.20
33.20
38.30
51.90
62.40
67.50
79.00
57.70
46.80
52.90
51.60
53.50
53.60
50.00
49.70
50.20
48.10
39.80
34.80
31.60
37.40
40.80
41.70
44.40

36.70
33.20
31.80
35.50
34.40
35.00
33.10
30.10
27.80
27.30
27.50
28.30
27.30
26.70
26.30
24.70
25.30
22.70
23.00
22.00
22.00
23.00
24.70
26.70
26.00
27.60
28.30
29.00
28.30
29.30
30.90
29.60
31.90
33.20
30.60
32.60
32.90
32.30
33.30
41.80
58.30
63.90
67.80
74.40
48.40
49.10
50.70
49.40
52.20
50.40
48.10
48.70
48.00
43.50
36.80
32.70
33.20
37.80
40.30
40.70
43.50

19.30
19.03
18.48
18.11
18.24
17.20
16.89
16.20
16.48
16.68
17.01
17.83
17.55
18.40
18.32
18.78
19.07
19.23
20.13
20.08
20.92
21.51
21.20
22.19
22.07
22.44
23.21
26.08
32.59
37.24
37.17
41.47
35.82
34.30
35.15
34.83
35.71
36.17
35.03
35.36
35.09
34.26
30.99
27.61
26.47
28.58
29.36
29.67
30.74

0.73
0.71
0.74
0.76
0.76
0.73
0.80
0.78
0.82
0.83
0.90
0.90
1.00
0.98
1.03
1.02
1.05
1.14
1.15
1.07
1.15
1.15
1.19
1.20
1.22
1.18
1.14
1.21
1.16
1.19
1.20
1.24
1.33
1.33
1.40
1.48
1.39
1.48
1.50
1.52
1.59
1.49
1.43
1.30
1.27
1.30
1.36
1.46
1.51

1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

11.31
12.50
12.30
10.55
8.93
10.09
11.85
13.49
18.02
15.21
14.83
15.36
16.88
21.21
24.19
26.18
25.46
35.60
44.15
45.43
41.12
55.62
58.03
59.72
69.07
65.06
76.45
86.12
93.32
84.45
95.04
102.04
90.31
93.49
103.30
118.42
96.11
72.56
96.86
103.81
90.25
99.71
110.87
132.97
117.28
144.27
166.39
171.61
208.19
264.51
250.48
285.41
339.97
325.5
416.08
435.23
472.99
465.25
614.42
766.22
963.36

0.51
0.62
0.67
0.71
0.59
0.61
0.64
0.66
0.71
0.84
0.93
1.14
1.47
1.41
1.41
1.45
1.54
1.64
1.74
1.79
1.75
1.83
1.95
2.02
2.13
2.28
2.50
2.72
2.87
2.92
3.07
3.16
3.14
3.07
3.15
3.38
3.60
3.68
4.05
4.67
5.07
5.65
6.16
6.63
6.87
7.09
7.53
7.90
8.28
8.81
9.73
11.05
12.10
12.20
12.38
12.58
13.18
13.79
14.90
15.50
16.2

0.64
0.90
1.05
1.16
1.03
0.94
0.93
10.96
1.06
1.61
2.29
2.32
2.84
2.44
2.40
2.51
2.77
3.62
3.41
3.37
2.89
3.39
3.27
3.19
3.67
4.02
4.55
5.19
5.55
5.33
5.76
5.78
5.13
5.70
6.42
8.16
8.89
7.96
9.91
10.89
12.33
14.86
14.82
15.36
12.64
14.03
16.64
14.61
114.48
17.50
23.76
22.87
21.34
15.91
19.09
21.88
30.60
33.96
38.73
39.72
37.71

0.88
0.56
0.56
0.53
0.63
0.69
0.72
0.75
0.76
1.01
1.35
1.58
1.32
2.12
2.39
2.58
1.80
1.81
3.21
3.86
2.54
3.74
4.28
2.91
3.39
3.50
4.09
4.46
5.44
5.55
6.17
8.05
9.11
5.66
4.62
7.93
11.03
7.24
5.70
5.28
7.78
10.88
11.37
17.63
14.60
9.37
11.11
8.35
7.31
6.25
7.63
9.29
8.43
6.92
3.91
3.44
4.35
6.45
5.68
5.78
5.85

125

14.00
13.30
13.70
13.90
16.50
17.50
17.80
18.10
18.40
24.50
27.70
27.30
25.90
30.50
30.00
29.10
29.40
29.20
29.70
31.00
31.50
31.70
31.60
31.80
31.70
31.60
31.80
31.80
32.90
33.40
33.80
34.80
36.50
37.30
38.80
41.60
49.00
57.40
59.90
62.80
66.80
73.80
85.20
95.20
99.70
100.20
102.90
103.40
103.20
100.50
104.60
110.5
114.9
119.0
115.6
118.0
119.1
122.9
126.3
129.7
125.4

41.90
39.80
41.10
41.80
49.70
52.70
53.40
54.30
55.40
73.20
82.90
81.60
77.60
91.20
89.70
87.20
88.00
87.40
88.80
92.70
94.30
94.80
94.70
95.20
95.00
94.70
95.20
95.20
98.60
100.10
101.10
104.30
109.30
111.80
116.30
124.50
146.60
171.80
179.40
188.10
200.10
220.80
254.90
284.80
298.30
299.90
308.00
309.50
308.90
300.90

39.60
38.90
39.60
44.00
49.80
52.00
52.40
53.30
61.00
76.50
82.80
78.70
81.80
91.10
88.60
87.40
87.60
87.80
90.70
93.30
94.60
94.80
94.90
94.50
94.80
94.50
94.70
96.60
99.80
100.00
102.50
106.50
110.40
113.90
119.10
134.70
160.10
174.90
183.00
194.20
209.30
235.60
268.80
293.40
299.30
303.10
310.30
308.70
299.80
307.70

30.21
29.97
30.30
32.41
36.25
39.67
41.91
43.45
46.44
51.32
54.37
54.00
54.76
58.93
60.84
62.24
63.41
63.85
65.18
67.27
69.08
70.16
71.69
72.61
73.69
74.85
76.11
77.80
80.57
82.74
86.34
90.39
95.08
99.23
103.26
110.20
121.88
131.60
138.95
147.68
158.38
172.72
190.51
206.93
218.52
227.74
236.55
250.42

1.48
1.54
1.58
1.64
1.67
1.71
1.75
1.83
1.95
1.91
1.91
1.90
1.94
1.95
1.98
2.01
2.01
2.07
2.11
2.12
2.13
2.19
2.22
2.24
2.29
2.33
2.41
2.50
2.58
2.63
2.72
2.79
2.84
2.88
2.98
3.05
3.04
3.09
3.20
3.30
3.40
3.47
3.49
3.52
3.54
3.63
3.73
3.71

1999
2000
2001

1248.77

16.69

48.17

5.45

122.9
128.3
138.8

Notes on Data
An annual series of January values of the Standard and Poor Composite Stock Price Index starting in 1871 was
used as the basis of empirical work in Chapters 1, 3, 5, 6, 8, 16 and 21. This series, Table 26.1 Series 1, was
taken from Standard and Poor's Statistical Service Security Price Index Record, various issues, from Tables
entitled "Monthly Stock Price Indexes Long Term."
The dividend and earnings series that correspond to this stock price series are spliced together from two
sources. Starting in 1926, the nominal dividend series are dividends per share, 12 months moving total adjusted
to index for the last quarter of the year. Starting in 1926, the nominal earnings series are earnings per share,
adjusted to index, 4 quarter total, fourth quarter. These are from a table entitled "Earnings, Dividends and
PriceEarnings Ratio Quarterly." of Standard and Poor's Statistical Service Security Price Index Record.
Standard and Poor's does not publish dividend or earnings series before 1926, however, their source for the
Standard and Poor Index before 1926, a volume by Cowles [1939], gives a dividend series corresponding to the
index, series Da-1, pp 388389, which I multiplied by the ratio of the series in 1926 to adjust for change in base
year.
A problem Cowles faced was absence of earnings data for many of the stocks in the Standard and Poor
Composite Index. He thus presented series PEA-1 "prices of stocks for which Earnings Data are available,
all stocks," a series of earnings E-1 on these stocks, and the ratio R-1 of these series, the "earnings-price ratio."
We computed the Standard and Poor Composite Earnings series for years before 1926 as series R-1 (Cowles
[1939] pages 404405) times the annual average Standard and Poor Composite Index for the year. The spliced
dividend and earnings series appear in Table 24.1 as series 2 and 3.
The absence of earnings data for some stocks is of some importance for the accuracy of the earnings series.
One indication of the potential importance of their omission can be found by comparing the series P-1 (the
Cowles index for all stocks) and the series PEA-1 (the Cowles series prices of stocks for which earnings data
are available.) The ratio of P-1 to PEA-1 18711925 ranged from 0.98 to 1.27, the biggest discrepancies
occuring in the earliest years of the sample. Another suggestion of the importance of the omissions is in Cowles
list ([1939], Appendix II, pp. 456475) of the companies in the index and the years for which the companies'
earnings are available. Typically, lack of data on earnings comes for isolated years (as if earnings reports were
occasionally missing) or for single years near the begin or end of the inclusion of the company in the index.
Wilson and Jones [1987] have recently examined the Cowles data for accuracy. They found some apparent
errors in Cowles' monthly series of cumulated returns (Cowles data implied negative dividends for some months)
and produced an alternative monthly return series that attempted to correct these errors. They concluded that
"the overall impact of these revisions as compared to the original Cowles Commission data is minimal." The
Cowles monthly data that they criticise is not used here, returns are computed on a January to January basis
assuming dividends are not reinvested during the year.
The nominal interest rate series, Table 26.1, Series 4 is the total return to investing for six months in January at
the January 46 month prime commercial paper rate (six month starting January 1980) and for another six
months at the July 46 month prime commercial paper rate (six month starting July 1980). (Starting 1998, 6month commercial paper rate is replaced here by the 6-month certificate of deposit rate, secondary market.) It is
computed as 100[1/((1Rjan/200)(1Rjul/200)) 1]. Data starting 1938 are from the Federal Reserve Bulletin.
Data before 1938 are from Macaulay [1938], Table 10, pp. A142A160.

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The U.S. Bureau of Labor Statistics has been emphasizing the Finished Goods Producer Price Index, rather
than the All Commodities Producer Price Index ever since the Producer Price Index replaced the Wholesale
Price Index in 1978 (see Early [1978]). The Finished Goods Producer Price Index is supposed to be superior
since it is not affected by the double counting of intermediate and final goods that infects the All Commodities
Producer Price Index. Unfortunately, the Finished Goods Producer Price Index is available only back to
1947. Any earlier series that might be spliced to it would be comparable to the All Commodities Producers Price
Index. It was decided, therefore, to continue to use the All Commodities Index shown here, which the BLS
makes available on a monthly basis back to 1913.
Starting with January, 1988 the BLS changed the reference base year for the producer price index from 1967 =
100 to 1982 = 100 (see "Producer Price Indexes January 1988," News, Bureau of Labor Statistics, Feburary
12, 1988). Table 24.2, Series 5 is the January Producer Price Index All Commodities with the 1982 base year
starting with 1913. [Current data are available as series WPU00000000 on the Bureau of Labor Statistics web
site: (http://stats.bls.gov:80/cgi-bin/surveymost?wp).]; Data from before 1913 are from the January figures from
the Warren and Pearson Index [1935], Chapter 1, Table 1, pp. 1114 divided by the ratio of the series in 1913.
Previously published papers in this volume use earlier producer price index series with 1967 = 100, Table 24.2,
Series 6 and 7. These series are built up of component series, by multiplying the earlier series by the ratio of the
indexes at the date of the first observation of the succeeding series.
Series 6 is the Producer Price Index for January. For 1947 to the end of the sample the series is the January
Producer Price Index all commodities 1967 = 100 from the Survey of Current Business. For 1924 to 1946 the
series used is January Wholesale Price Index (WPI) all commodities 1926 = 100 from the Federal Reserve
Bulletin, divided by 1.933. For 1914 to 1923 the series used is January WPI all commodities 1913 = 100 from the
Federal Reserve Bulletin, divided by 2.949. For 1900 to 1913 the series used is January WPI All Commodities
1890-1899 = 100 from Wholesale Prices, BLS Bulletin #149, Government Printing Office, Washington, 1914,
divided by 4.1613. For 1871 to 1899 the series is the same as series 8 below.
The annual average producer price index Series 7 is, for 1947 the end of the sample, the annual average
Producer Price Index all commodities 1967 = 100 from the Survey of Current Business. For 1924 to 1946 the
series used is annual average WPI all commodities 1926 = 100 from the Federal Reserve Bulletin, divided by
1.9843. For 1914 to 1923 the series used is annual average WPI all commodities 1913 = 100 from the Federal
Reserve Bulletin, divided by 3.038. For 1891 to 1913 the series used is annual average WPI all commodities
1913 = 100 from Wholesale Prices, BLS Bulletin #320, Government Printing Office, Washington, divided by
3.0395. For 1871 to 1890 the series used is annual average WPI 1890-99 = 100, from Appendix I of BLS Bulletin
#114, divided by 4.1613.
The consumption deflator, 1972 = 100, (Table 24.2, Series 8) and real per capita consumption (Table 24.2,
Series 9), both for nondurables and services, were used in Chapter 16 and 21, as well as Shiller [1982] and
Campbell and Shiller [1988]. The data sources are given in Shiller [1982].

References
Campbell, John Y. and Robert J. Shiller. 1986. "The Dividend-Price Ratio and Expectations of Future Dividends
and Discount Factors," Review of Financial Studies 1: 196228.
Cowles, Alfred, III and Associates. 1939. Common Stock Indexes, 2nd Edition, Bloomington, IN: Principia Press.
Early, John F. 1978. "Improving the Measurement of Producer Price Change," Monthly Labor Review 101: 715.
Macaulay, Frederic. 1938. Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond
Yields, and Stock Prices in the United States Since 1856, New York, National Bureau of Economic Research.

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Shiller, Robert J. 1982. "Consumption, Asset Markets, and Macroeconomic Fluctuations," Carnegie-Rochester
Series on Public Policy 17: 20338.
Warren, George F. and Frank A. Pearson. 1935. Gold and Prices, New York, John Wiley and Sons.
Wilson, J.W., and C.P. Jones. 1987. "A Comparison of Annual Common Stock Returns 18711925 with 1926
1985," Journal of Business 60: 235258.

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