I study the effect of observable predictors that imperfectly predict conditional expected stock returns on optimal life-cycle consumption and portfolio choice in the presence of undiversifiable labor income risk. Investors filter the unobservable expected stock returns from realized predictive...

This paper investigates whether an infinite horizons buffer stock saving model with internal, multiplicative, habit formation preferences can replicate the macroeconomic stylized facts about consumption expenditures on non-durables and services. Individual consumption smoothing and consumption...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...