properties of the estimated consumption/portfolio rules, under both the empirical and the true dynamics of excess returns. The … the risk/return trade-off within an optimizing setting that endogenizes return predictability. In the experiments that we … consider, the estimation issues are so severe that simple unconditional consumption and portfolio rules actually outperform (in …

Risk premia in the consumption capital asset pricing model depend on preferences and dividends. We develop a … decomposition which allows for the separate treatment of both components. We show that preferences alone determine the risk …-return trade-off measured by the Sharpe-ratio. In general, the risk-return trade-off implied by preferences depends on the …

, agents’ prior beliefs are endogenously heterogeneous. Finally, in a consumption-saving problem with stochastic income, agents …

estimate a large risk aversion, an elasticity of intertemporal substitution higher than one, and substantial adjustment costs …

This paper investigates the causes of the Italian consumption bust of the early 1990s by estimating deviations from … 'normal' consumption using household level data for 1985-94. The data set used is a particularly rich, but as yet unexplored … households each year. The main findings are that the decline in consumption was larger for the working age households. The fall …

transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX … repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life … evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in …

representative agent’s coefficient of relative risk aversion to vary with the underlying economy’s growth rate. Existence of … risk aversion, the equilibrium risk free and risky security returns are demonstrated to have volatilities and an associated …

Value stocks have higher exposure to innovations in the nominal bond risk premium than growth stocks. Since the nominal … bond risk premium measures cyclical variation in the market’s assessment of future output growth, this results in a value … risk premium provided that good news about future output lowers the marginal utility of wealth today. In support of this …

We derive new estimates of total wealth, the returns on total wealth, and the wealth effect on consumption. We estimate … the prices of aggregate risk from bond yields and stock returns using a no-arbitrage model. Using these risk prices, we … compute total wealth as the price of a claim to aggregate consumption. We find that US households have a surprising amount of …

-th moment of the consumption distribution, where x is the coefficient of relative risk aversion. We use data from the Consumer … quantities are constrained Pareto optimal. Under the assumption that agents have constant relative risk aversion, we derive a …