Campbell and Cochrane (1999) propose a preference speci cation that can explain a wide variety of asset pricing puzzles such as the high equity premium. They augment the basic power utility function with a time-varying subsistence level, or \habit", which is in the spirit of \catching up with the Joneses" but with a novel nonlinear mapping of consumption into habit. This paper demonstrates a su...

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...

Everyday function demands efficient and flexible decision-making that allows for habitual and goal-directed action control. An inability to shift has been implicated in disorders with impaired decision-making, including obsessive-compulsive disorder and addiction. Despite this, our understanding of the specific molecular mechanisms and circuitry involved in shifting action control remains limit...

Our objective is to investigate, how the combination of habit formation with endogenous capital utilization decisions affects the process of economic growth. We find that in the presence of positive productivity growth, habit formation in consumption reduces the rate of capital utilization while increasing the long run stock of capital. We show in the Chamley–Judd result of zero income capital ...

We develop an external habit persistence model where the time series of the aggregate portfolio and the cross section of stock returns are simultaneously studied and tested. By applying a slightly modi...ed version of the model of Campbell and Cochrane (1999), we obtain closed form solutions for individual securities prices and returns and a full characterizations of the dynamics of the risk-re...

where h is the stock of habits, c is the instantaneous flow of consumption, ρ is the coefficient of relative risk aversion, and γ indexes the importance of habits. If γ = 0 then only the absolute level of consumption is important (the standard CRRA model), while if γ = 1, then consumption relative to the habit stock is all that matters. For values of γ between zero and one, both the absolute an...

where h is the stock of habits, c is the instantaneous flow of consumption, ρ is the coefficient of relative risk aversion, and γ indexes the importance of habits. If γ = 0 then only the absolute level of consumption is important (the standard CRRA model), while if γ = 1, then consumption relative to the habit stock is all that matters. For values of γ between zero and one, both the absolute an...