Ergodicity, State Prices, and Long Bond Returns
Document Type
Article
Publication Date
1-1-1998
Abstract
We present an analysis of price systems in securities markets with infinitely many time periods and infinitely many uncertain states of the world. A key result is that a Markov price system (MPS) has a unique representation in terms of the returns on a known set of bonds. The result implies that securities prices are the discounted value of dividends, where discount factors are the reciprocal of the returns on a long-horizon discount bond.
DOI
10.1111/1467-9965.00046
MSU Digital Commons Citation
Tessitore, Anthony and Usmen, Nilufer, "Ergodicity, State Prices, and Long Bond Returns" (1998). Department of Accounting and Finance Faculty Scholarship and Creative Works. 56.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/56