- Second Interpretation
Second Interpretation
In the The second interpretation rests on the fact all agents are equal in Lucas setting and then the analysts are themselves the agents who is solving Lucas problem. Consequently, in the second interpretation, actual prices should converge in distribution to analysts' forecasts.
Methods and Data
The empirical strategy consists in a series of steps. The first one is to collect actual prices and target prices from analysts of Brendan E. Cryan & Co., Citadel Securities LLC, GTS Securities LLC, IMC Financial Markets, and Virtu Financial Capital Markets LLC, which are market makers in New York Stock Exchange (NYSE). Then I will investigate the first interpretation of Lucas model, that is, we will consider target prices as the result of an estimation of Lucas asset pricing model and test for causality in the sense of \citet{Granger_1969} between those actual and target prices.