Centre for Development Economics
Department of Economics

Delhi School of Economics


Estimating Expected Asset Returns With the Present Value Model of Consumption and Fed Forecasts


Kundan Kishor
(University of Wisconsin-Milwaukee)

 (Thursday, 03 August, 3:15 PM IST)
Venue: Amex Room 


This paper examines the use of Greenbook forecasts of consumption and income to predict expected asset returns through a present-value model of consumption. The study finds that despite the valuable information contained in Greenbook forecasts, the expected asset returns obtained from this approaches do not offer meaningful insights into future asset returns. This contrasts with previous literature suggesting predictability using the present-value model. The paper also considers an alternative approach using an unobserved component model to estimate asset returns, but it similarly fails to provide valuable information. However, the research highlights that estimating expected excess consumption growth using the present-value model does yield valuable insights into future changes in excess consumption growth.

All are cordially invited.

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