Recent studies provide strong statistical evidence challenging the existence of out-of-sample return predictability. The economic significance of return predictability is also controversial. In this paper, we find significant economic gains for dynamic trading strategies based on return...

We develop a theory of valuation of payoff streams in infinite-horizon sequential markets and discuss implications of this theory for equilibrium under various portfolio constraints. We study the nature of asset price bubbles in light of this theory. We show that there cannot be equilibrium...