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Sunspots and predictable asset returns

Challe, Edouard (2004), Sunspots and predictable asset returns, Journal of Economic Theory, 115, 1, p. 182-190. http://dx.doi.org/10.1016/S0022-0531(03)00253-9

Type
Article accepté pour publication ou publié
Date
2004
Journal name
Journal of Economic Theory
Volume
115
Number
1
Publisher
Elsevier
Pages
182-190
Publication identifier
Metadata
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Author(s)
Challe, Edouard
Abstract (EN)
This paper uses a stylised asset-pricing model to show that sunspots may cause asset returns to be predictable, a widely documented feature of many speculative markets. This result parallels and extends previous works showing that sunspots render asset prices excessively volatile.
Subjects / Keywords
Cointegration; Return predictability; Sunspots
JEL
D84 - Expectations; Speculations
E44 - Financial Markets and the Macroeconomy
G12 - Asset Pricing; Trading Volume; Bond Interest Rates