The fact that the market value of firms traded in U.S. stock markets displays considerable fluctuations over short time periods is very well-known and receives a great deal of attention in the press. From the perspective of economic theory, this elevated level of short-run volatility in the stock market is very challenging to understand because fundamentals—i.e., variables that one would consider key determinants of market values, such as profits, dividends or output growth—do not fluctuate nearly as much.