tag:blogger.com,1999:blog-6837159629100463303.post1990481862294819912..comments2021-07-22T00:29:53.205-07:00Comments on Information Transfer Economics: The basic asset pricing equation as a maximum entropy conditionJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-6837159629100463303.post-45628637253165824522015-05-28T08:44:35.500-07:002015-05-28T08:44:35.500-07:00I'm not sure -- I'd have to learn more abo...I'm not sure -- I'd have to learn more about it ...Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-56581232769483706882015-05-28T08:40:57.344-07:002015-05-28T08:40:57.344-07:00Cheers, LAL. The idea of p = K x seems like it wou...Cheers, LAL. The idea of <i>p = K x</i> seems like it would be pretty general ... we can think of K as a time translation operator (or more specifically, K⁻¹) propagating the price from the present to the future.<br /><br /><a href="http://en.wikipedia.org/wiki/Translation_operator_%28quantum_mechanics%29" rel="nofollow">http://en.wikipedia.org/wiki/Translation_operator_%28quantum_mechanics%29</a><br /><br />Actually the framework above is pretty general -- you can use anything for the market U→c. For example if you used nominal output N→c, you'd end up with a formula with partial derivatives of nominal output ...<br /><br />$$<br />p_{i} = \frac{\alpha_{i}}{\alpha_{j}} \frac{\partial N/\partial c_{j}}{\partial N/\partial c_{i}} p_{j}<br />$$Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-23180985894509068792015-05-27T19:38:28.665-07:002015-05-27T19:38:28.665-07:00Rational expectations/ the emh also sets up the la...Rational expectations/ the emh also sets up the largest empirical research program in macro besides maybe VARs. I'm talking about Hansen and singletons generalized method of moments in which the first order conditions are assumed to be not correlated with the data by the emh....that research program really only needs that to continue...do I get it from the information model?LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-71276874336316379222015-05-27T19:34:36.063-07:002015-05-27T19:34:36.063-07:00In the fiscal theory of the price level, the price...In the fiscal theory of the price level, the price level adjusts according to the link between today's govt bonds and the government's future taxes and dividends...Cochrane uses the equation to make fairly convince stories about the past recession. A small note towards using the pricing equation as a framework.LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-60195008827800798262015-05-27T19:13:58.478-07:002015-05-27T19:13:58.478-07:00I thought as much, thanks for doing the algebra. ...I thought as much, thanks for doing the algebra. One of the main take a ways I get from Cochrane's asset pricing is that even when not using a consumption model you don't really have to change the asset pricing equation by much. Over and over again we have p= pricing kernel* payout....many empirical approaches lead to the same basic idea...and I'm glad to see a method that takes a utility model and gives us a different pricing kernel. It is interesting though the pricing equation is supposed to hold ex post. Measurements of volatility from that fact are where shiller gets his strongest argument against the emh...LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.com