This paper investigates the empirical performance of intertemporal optimization models that relax the restriction imposed by expected utility that risk aversion and intertemporal substitution are negatively related. The authors estimate a system of rates of return and consumption growth...

In this paper, the authors show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in U.S. household-level data. They propose a flexible specification of preferences that allows multiple commodities and...

Two competing explanations of the UK consumer boom in the late 1980s are the financial liberalization-imperfect housing market hypothesis of Muellbauer and Murphy and the hypothesis of King. We use 15 years of Family Expenditure Surveys, and cohort analysis, to investigate to what extent these...

In this paper, the authors present empirical evidence on aggregation problems with Euler equations for consumption. Their main results are that the estimates of the elasticity of intertemporal substitution for consumption are consistently lower for aggregate data than for average cohort data and...

This paper addresses two topics. First, it nests the consumption and static capital asset pricing model in a unified framework. Second, it tests for market efficiency. The first test is based on the idea that different models price risk on the basis of the covariance with different benchmark...

The authors assess the empirical validity of the life-cycle model using a time series of cross sections and a novel parametrization of preferences. The main findings are as follows: the excess sensitivity of consumption growth to labor income disappears when the authors control for demographic...