@techreport{Franke2004Asset,
abstract = {This paper analyzes the e\textcurrency{}ect of non-constant elasticity of the pricing kernel
on asset return characteristics in a rational expectations model. It is shown
that declining elasticity of the pricing kernel can lead to predictability of asset
returns and high and persistent volatility. Also, declining elasticity helps
to motivate technical analysis and to explain stock market crashes. Moreover,
based on a general characterization of the pricing kernel, we propose
analytical asset price processes which can be tested empirically. The numerical
analysis reveals strong deviations from the geometric Brownian motion
which are caused by declining elasticity of the pricing kernel.},
author = {G\"{u}nter Franke and Erik L\"{u}ders},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {G12; 330; Pricing Kernel; Viable asset price processes; Serial correlation; Heteroskedasticity; Stock market crashes; Kapitalertrag; B\"{o}rsenkurs; Prognoseverfahren; Wertpapieranalyse; Kapitalmarkttheorie; Risikoaversion; Stochastischer Prozess; Autokorrelation; Theorie},
language = {eng},
number = {04/05},
title = {Why Do Asset Prices Not Follow Random Walks?},
type = {Discussion paper series / Universit\"{a}t Konstanz, Center of Finance and Econometrics (CoFE)},
url = {http://hdl.handle.net/10419/23567},
year = {2004}
}
