This paper shows that consumption-based asset pricing puzzles arise from using globally concave-shaped consumption utility. We empirically find that asset returns correlate negatively with many individuals' low-quantile consumption growth. This finding challenges most mainstream models and...

We study the asset pricing implications of a general equilibrium Lucas endowment economy inhabited by two agents with habit formation preferences. Preferences are modeled either as internal or external habits. We allow for agents' heterogeneity in relative risk aversion and habit strength. We...

We explicitly solve for the aggregate asset prices in a general equilibrium Lucas endowment economy with two agents who are heterogeneous in their time-nonseparable preferences. Time-nonseparability is modeled either as internal or external habit preferences. Equilibrium quantities -- equity...

We explicitly solve for the aggregate asset pricing quantities of a general equilibrium Lucas endowment economy inhabited by two agents with habit formation preferences. Preferences are modeled either as internal or external habits. We allow for agents' heterogeneity in relative risk aversion...

We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions...

Using Canadian data, the consumption-based asset pricing model is studied, defined in terms of nondurable and durable goods consumption. A two-stage estimation procedure is used, which takes account of the presence of common stochastic trends in the forcing processes. This method yields more...

This paper challenges the view that alternative consumption measures (garbage, fourth quarter, unfiltered consumption) can address the shortcomings of consumption-based asset pricing. When the CRRA model is confronted with the cross-section of asset returns and the risk-free rate volatility, the...

Previous writers have attempted to resolve the equity premium puzzle by employing a utility function that depends on current consumption minus (or relative to) past habit consumption. This paper points out that an individual's current utility may also depend upon how well off in the recent past...

We propose a single-factor asset pricing model based on an indicator function of consumption growth being less than its endogenous certainty equivalent. This certainty equivalent is derived from generalized disappointment aversion preferences, and it is located approximately one standard...

We explicitly solve for the aggregate asset prices in a discrete-time general-equilibrium endowment economy with two agents who differ with respect to their preferences for risk aversion and sensitivity to habit, either internal or external. We compute equilibrium quantities -- equity premium,...