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Production and the Real Rate of Interest: A Sample Path Equilibrium

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  • David Feldman

Abstract

This paper examines a multiperiod production economy where investors do not observe the realizations of productivity factors or security expected returns. Unlike previous work, which expresses the equilibrium conditions as functions of unobservable (to both real-world investorsand empiricists) moments of the distributions of returns, we express the equilibrium real rate asa function of the observable sample paths of realizations of returns. We provide a framework for empirically testing this and other asset pricing models without outside-the-model econometric assumptions needed for producing the unobservable moments of returns. We construct versions of the restrictions for any time interval between observations. JEL codes: E43, G12, D92, D80, D51

Suggested Citation

  • David Feldman, 2001. "Production and the Real Rate of Interest: A Sample Path Equilibrium," Review of Finance, European Finance Association, vol. 5(3), pages 239-267.
    • Handle: RePEc:oup:revfin:v:5:y:2001:i:3:p:239-267.
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    File URL: http://hdl.handle.net/10.1023/A:1013817632247
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    Cited by:

    1. Constantin Mellios, 2007. "Interest rate options valuation under incomplete information," Annals of Operations Research, Springer, vol. 151(1), pages 99-117, April.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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