Asset Prices Under Habit Formation and Reference-Dependent Preferences
نویسندگان
چکیده
منابع مشابه
“Asset Prices under Habit Formation and Reference-Dependent Preferences”
This article explains the high level and the countercyclical variation of the equity premium in a consumption-based asset pricing model with low large-scale risk aversion. Investors have gain-loss utility over consumption relative to slowly time-varying habit. Stocks deliver low returns in recessions when consumption falls below habit; investors therefore require a high premium for holding stoc...
متن کاملAsset Prices Under Prospect Theory and Habit Formation
In this paper, we develop a consumption-based asset pricing model motivated by prospect theory, where habit formation determines the endogenous reference point. This exploits the similarity between habit formation and prospect theory. Both emphasize that the investor does not care about the absolute amount of gain or loss, but rather compares the gain or the loss experienced to a benchmark. The...
متن کاملInternational Asset Pricing under Habit Formation and Idiosyncratic Consumption Risk
This paper presents a consumption-based asset pricing model to explain the equity premium and riskfree puzzles as well as the predictability of returns in the international equity markets. We find that because the model entails idiosyncratic consumption risk which is higher than the aggregate consumption risk, the model helps lower the investor risk aversion needed to explain the mean equity pr...
متن کاملConsumption Commitments: A Foundation for Reference-Dependent Preferences and Habit Formation
We build a theory of reference-dependent preferences based on adjustment costs in consumption. The main contribution of the theory is that it endogenizes the evolution of the reference point. The reference point generated by our model exhibits several features exogenously assumed in existing theories: it (1) reects recent expectations, (2) depends on past consumption levels, and (3) diminishes...
متن کاملConsumption and Asset Prices with Recursive Preferences
We analyze consumption and asset pricing with recursive preferences given by Kreps–Porteus stochastic differential utility (K–P SDU). We show that utility depends on two state variables: current consumption and a second variable (related to the wealth–consumption ratio) that captures all information about future opportunities. This representation of utility reduces the internal consistency cond...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Journal of Business & Economic Statistics
سال: 2008
ISSN: 0735-0015,1537-2707
DOI: 10.1198/073500107000000205