tag:blogger.com,1999:blog-582368152716771238.post5769476366439208423..comments2021-02-26T03:45:55.233-06:00Comments on The Grumpy Economist: Asset Pricing CompetitionJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-582368152716771238.post-40600472323757465172018-01-23T08:54:31.969-06:002018-01-23T08:54:31.969-06:00It is also a great example of exemplary collegiali...It is also a great example of exemplary collegiality. <br />Wishing blog writing were more often like this and not like outrageous personal attacks in the style of Krugman and DeLong. Really can't grasp how any (serious) academic can behave like that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-12164485998491477252017-12-20T01:43:53.140-06:002017-12-20T01:43:53.140-06:00Many thanks for an excellent review of Campbell...Many thanks for an excellent review of Campbell's book. <br />More broadly, I think this is a great example how useful economic blogs can be. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-64186704715171508232017-12-15T15:18:44.069-06:002017-12-15T15:18:44.069-06:00I think of the two books (by Cochrane and Campbell...I think of the two books (by Cochrane and Campbell) as complements not competitors. You should probably have both on your bookshelf if you're serious about asset pricing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-15101544111634801672017-12-15T14:41:33.589-06:002017-12-15T14:41:33.589-06:00Professor Cochrane, when do you plan to publish th...Professor Cochrane, when do you plan to publish the revised version of "Asset pricing", please? (On the question of continuous-time versus discrete-time, I sit firmly and deliberately on the fence: a world-class researcher must know both.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-71147370652176448552017-12-15T00:09:41.447-06:002017-12-15T00:09:41.447-06:00Many thanks for your reply.
Those models are comp...Many thanks for your reply.<br /><br />Those models are complex enough to see which variable(s) is/are control/state variable(s). When reading the paper in that tradition, I always struggle with the following quote keeping in my mind (probably you know):<br /><br />"You wake up in the morning, look at your state variables, make decisions about your control variables, then go back to sleep until the next day."<br /><br />But when I read the Ben Moll's paper on continuous-time NK models, I was surprised to know that \dot{p} is the control variable, and p is the state variable! What a hard discipline...Anonymoushttps://www.blogger.com/profile/14153680074719101184noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-50540093377121850592017-12-14T21:39:59.368-06:002017-12-14T21:39:59.368-06:00Timing actually matters a lot for determinacy in ...Timing actually matters a lot for determinacy in NK model. Just a slightly change from forward looking Taylor rule to backward looking one will get drastically different resultsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-45409477205291036412017-12-14T14:04:12.676-06:002017-12-14T14:04:12.676-06:00Anonymous, When I was on faculty at Loyola of Chic...Anonymous, When I was on faculty at Loyola of Chicago, I used David C Shimko's, "Finance in Continuous Time" A Primer! Shimko is clear but requires the student understand financial valuation techniques, discrete-time stochastic processes, have facility with calculus and exposure to partial diffeq. As for Ito's Lemma, facility with Taylor series is helpful.David Seltzernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-72460436680351609162017-12-14T10:39:58.765-06:002017-12-14T10:39:58.765-06:00New Keynesian models are often quite dependent on ...New Keynesian models are often quite dependent on timing assumptions that require careful thought as one takes a continuous time limit. What does a one period lag between one action and another mean? Even in the most basic model, i_t = E_t pi_t+1; i_t = phi pi_t, if you change that latter equation to i_t = phi E_t pi_t+1 or i_t = phi pi_t-1 you get vastly different models. This isn't a criticism, really, it means that thinking hard about taking the continuous time limit, what variables are state variables and what variables are jump variables, is often a good discipline for understanding how a model works. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-36583433593344435672017-12-14T10:37:04.810-06:002017-12-14T10:37:04.810-06:00The basic idea is Q = market / book = function of ...The basic idea is Q = market / book = function of investment/capital, which complements consumption side. The rest is all the hard work it takes to see how that works in the data and whether and which prices really do line up with investment choices. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-31790304422671509152017-12-14T08:42:41.751-06:002017-12-14T08:42:41.751-06:00John, do you or the other John do a reconciliation...John, do you or the other John do a reconciliation section on Zhang et al and supply-side vs demand-side asset pricing. Zhang et al's work crosses my emeritus desk. I open it and promise myself to think it through. It ends up in a big pile. BestBob Floodhttps://www.blogger.com/profile/10755214976203287542noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28796534905028000352017-12-14T03:27:03.348-06:002017-12-14T03:27:03.348-06:00Sounds great. Look forward to getting a copy.Sounds great. Look forward to getting a copy.Cokerhttps://www.blogger.com/profile/02631288439451432057noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-29915535231037732272017-12-14T00:14:27.784-06:002017-12-14T00:14:27.784-06:00A great review of Campbell's new book. I have ...A great review of Campbell's new book. I have not yet read his book, but I prefer the continuous-time treatment, as in your Asset Pricing. With initial investment in some math, continuous-time methods bring cleaner results, and approximation gets less necessary.<br /><br />More importantly, sometimes the same model seems to yield different predictions in response to author’s “time choice” (discrete or continuous). Many models in New Keynesian tradition, full of approximations, adopt the discrete-time approach, and I wonder what happens when they are converted to the continuous-time version (though recently few continuous-time versions are emerging, looks promising). Recent studies put financial frictions into NK models, and I think they will provide the useful predictions if put in continuous time, rather than in discrete time. This is about methodology, anyway.<br /><br />Looking forward to the next edition of your Asset Pricing!Anonymoushttps://www.blogger.com/profile/14153680074719101184noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-32859519563143130872017-12-13T22:55:02.903-06:002017-12-13T22:55:02.903-06:00Do you have a recommendation for a continuous time...Do you have a recommendation for a continuous time textbook which covers options, corporate bonds, and the other omitted topics?Anonymousnoreply@blogger.com