Despite increasing criticism by economists and forecasters of the ability of the stock market to predict economic recessions, it is shown that 38 of the 41 measured recessions since 1802 have been preceded by an eight percent decline in the stock returns index. There have been twelve "false...

No economic event on or about October 19, 1987 can explain the record collapse of equity prices that occurred on that day. In the summer of 1987 equity valuations were at a historically high levels based on current and projected earnings and the real interest rates available in the bond market.<p>...</p>

Spurred by the work of Mehra and Prescott (M-P), economists have been attempting to explain the surprisingly low levels of real interest rates in light of the behavior of aggregate consumption. This paper constructs a continuous "risk-free" interest rate series for the United States and the...

This manuscript reviews the evolving literature on the pricing of assets and the structure of financial markets. It begins with the development of early stock valuation models and proceeds to a description of the efficient-market hypothesis. The survey then examines recent empirical data that...

This paper explores the role of uncertain price level movements in determining the opportunity cost of holding both fiat and commodity moneys. It is shown that a monetary medium whose opportunity cost fluctuates countercyclically to real asset values lowers interest rates for bonds denominated...

This research examines a detailed time series of future aggregate profit forecasts. It seeks to determine whether the path of equity prices in the twelve month period surrounding the October 1987 crash could be justified by changes in the fundamental determinants of stock prices, i.e., the...

This study reformulates the National Income Accounts definitions of the government deficit and surplus and gross private saving. These new definitions are based on employing the change in the real value of government debt, due to price and interest rate changes, as a measure of the real deficit...