Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1003216 | Research in International Business and Finance | 2009 | 20 Pages |
Abstract
In this paper, I use stock return data to test an intertemporal model of the current account. I find that the model performs well in three countries: the U.K., Canada, and Japan. Hall [Hall, R.E., 1978. Stochastic implication of the life cycle-permanent income hypothesis: theory and evidence. J. Polit. Econ. 86 (6), 971–987] points out that because stock price predicts the future state of the economy, it predicts consumption. Assuming that consumption depends on permanent income, my empirical finding indicates that a representative agent smoothes consumption based on stock market information. In other words, stock market returns yield information about permanent income.
Keywords
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Business and International Management
Authors
Yoshihiro Kitamura,