TY - BOOK ID - 135162207 TI - Volatility Tests and Efficient Markets : A Review Essay AU - Cochrane, John H. AU - National Bureau of Economic Research. PY - 1991 PB - Cambridge, Mass. National Bureau of Economic Research DB - UniCat KW - Mathematical models. UR - https://www.unicat.be/uniCat?func=search&query=sysid:135162207 AB - This essay examines what volatility tests tell us about the data and what implications we should derive from them. It argues that volatility tests do not tell us that "prices are too volatile", implying that "markets are inefficient", but rather that "(discounted) returns are forecastable", implying that "current discount rate models leave a residual". It also argues that the discount rate residuals documented by volatility tests (and equivalent return forecasting regressions or Euler equation tests) are suggestive of rational, business cycle-induced discount rate movements, rather than "fads" or other inefficiencies. ER -