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Modeling Stock Prices without Knowing How to Induce Stationarity

Corrigendum

Published online by Cambridge University Press:  11 February 2009

David N. Dejong
Affiliation:
University of Pittsburgh
Charles H. Whiteman
Affiliation:
University of Iowa

Abstract

In “Modeling Stock Prices without Knowing How to Induce Stationarity” (1994, Econometric Theory 10, 701–719), we used posterior-odds calculations to evaluate restrictions imposed by a present-value model of stock prices across the equations of a VAR representation of stock prices and dividends. The results we reported are tainted by the omission of two factors: the Jacobians induced by the mapping of our priors over VAR parameters β into the restricted sample spaces relevant under hypotheses H2-H4 (hence, tainting our calculations of p(Hi|y,X) in (22) for i = 2–4), and an integrating constant needed in calculating the unrestricted probability p(Hi|y,X) in (22). Table 1 reports our revised calculations, which differ substantively from those reported previously.

Type
Research Article
Copyright
Copyright © Cambridge University Press 1996

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