On the fluctuations in consumption and market returns in the presence of labor and human capital: An equilibrium analysis

Journal of Economic Dynamics and Control

Volumn 23, Issue 7, 1999, Pages 1029-1064

  Basak, Suleyman ^a  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

C60; D51; D91; E20; G12; General equilibrium; Human capital; Labor; Production; Volatility

Indexed keywords

EID: 0013156632     PISSN: 01651889     EISSN: None     Source Type: Journal    
DOI: 10.1016/s0165-1889(98)00049-9     Document Type: Article

References (45)

1. Baxter, M., Jermann, U.J., 1993. The international diversification puzzle is worse than you think. Working Paper. University of Virginia, Charlottesville, VA.
2. Black F. Business Cycles and Equilibrium. 1987;Basil-Blackwell, New York.
3. Black F. Mean reversion and consumption smoothing. Review of Financial Studies. 3:1990;107-114.
4. Blanchard O.J., Fisher S. Lectures on Macroeconomics. 1989;The MIT Press, Cambridge, Massachusetts.
5. Blume M.E., Zeldes, S.P., 1994. Household stockownership patterns and aggregate asset pricing theories. Working Paper. Wharton School, University of Pennsylvania.
6. Bodie Z., Merton R.C., Samuelson W.F. Labor supply flexibility and portfolio choice in a life cycle model. Journal of Economic Dynamics and Control. 16:1992;427-449.
7. Breeden D.T. An intertemporal asset pricing model with stochastic consumption and investment opportunities. Journal of Financial Economics. 7:1979;265-296.
8. Brock, W.A., 1982. Asset prices in a production economy. In: McCall, J.J. (Ed.), The Economics of Information and Uncertainty. University of Chicago Press, Chicago, Illinois.
9. Campbell J.Y. Inspecting the mechanism: An analytical approach to the stochastic growth model. Journal of Monetary Economics. 33:1994;463-506.
10. Campbell J.Y. Understanding risk and return. Journal of Political Economy. 104:1996;298-345.
11. Cecchetti S.G., Lam P., Mark N. Mean reversion in equilibrium asset prices. American Economic Review. 80:1990;398-418.
12. Constantinides G. Habit formation. a resolution of the equity-premium puzzle Journal of Political Economy. 98:1990;519-543.
13. Constantinides, G.M., Donaldson, J.B., Mehra, R., 1997. Junior can't borrow: A new perspective on the equity premium puzzle. Working Paper. University of Chicago, Chicago, IL.
14. Cooley, T.F., Prescott, E.C., 1995. Economic growth and business cycles. In: Cooley, T.F. (Ed.), Frontiers of Business Cycle Research. Princeton University Press, Princeton, New Jersey.
15. Cox J.C., Ingersoll J.E., Ross S.A. An intertemporal general equilibrium model of asset prices. Econometrica. 53:1985;363-384.
16. Cox J.C., Huang C.F. Optimal consumption and portfolio policies when asset prices follow a diffusion process. Journal of Economic Theory. 49:1989;33-83.
17. Cuoco D. Optimal consumption and equilibrium prices with portfolio constraints and stochastic income. Journal of Economic Theory. 72:1997;33-73.
18. Danthine, J.P., Donaldson, J.B., 1994. Asset pricing implications of real market frictions. Working Paper. Columbia University, New York, NY.
19. Danthine J.P., Donaldson J.B., Mehra R. The equity premium and the allocation of income risk. Journal of Economic Dynamics and Control. 16:1992;533-559.
20. Detemple, J.B., 1996. Valuation of nontraded assets. Working Paper. McGill University, Montreal, Canada.
21. Donaldson J.B., Mehra R. Comparative dynamics of an equilibrium intertemporal asset pricing model. Review of Economic Studies. 51:1984;491-508.
22. Duffie D. Stochastic equilibria. Existence, spanning number, and the 'no expected financial gain from trade' hypothesis Econometrica. 54:1986;1161-1383.
23. Duffie D., Fleming W., Zariphopoulou T. Hedging in incomplete markets with HARA utility. Journal of Economic Dynamics and Control. 21:1997;753-782.
24. Duffie D., Huang C.F. Implementing Arrow-Debreu equilibria by continuous trading of a few long-lived securities. Econometrica. 53:1985;1337-1356.
25. Duffie D., Zame W. The consumption-based capital asset pricing model. Econometrica. 57:1989;1279-1297.
26. Eichenbaum M., Hansen L., Singleton K. A Time series analysis of representative agent models of consumption and leisure. Quarterly Journal of Economics. 103:1988;51-78.
27. Hansen G. Indivisible labor and the business cycle. Journal of Monetary Economics. 16:1985;309-327.
28. Harrison J.M., Kreps D. Martingales and arbitrage in multiperiod securities markets. Journal of Economic Theory. 20:1979;381-408.
29. Huang C.F. An intertemporal general equilibrium asset pricing model. the case of diffusion information Econometrica. 55:1987;117-142.
30. Jagannathan, R., Wang, Z., 1994. The CAPM is alive and well. Working Paper. Carlson School of Management, University of Minnesota, Minneapolis, MN.
31. Karatzas I., Lehoczky J.P., Shreve S.E. Optimal portfolio and consumption decisions for a 'small investor' on a finite horizon. SIAM Journal of Control and Optimization. 25:1987;1557-1586.
32. Karatzas I., Lehoczky J.P., Shreve S.E. Existence and uniqueness of multi-agent equilibrium in a stochastic, dynamic consumption/investment model. Mathematics of Operations Research. 15:1990;80-128.
33. Kydland F., Prescott E.C. Time to build aggregate fluctuations. Econometrica. 50:1982;1245-1370.
34. Lucas R. Asset prices in an exchange economy. Econometrica. 46:1978;1429-1445.
35. Mankiw G., Rotemberg J., Summers L. Intertemporal substitution in macroeconomics. Quarterly Journal of Economics. 100:1985;225-253.
36. Mayers, D., 1973. Nonmarketable assets and capital market equilibrium under uncertainty. In: Jensen, M. (Ed.), Studies in the Theory of Capital Markets. Praeger, New York.
37. Mehra R., Prescott E.C. The equity premium. a puzzle Journal of Monetary Economics. 15:1985;145-161.
38. Merton R.C. An intertemporal capital asset pricing model. Econometrica. 41:1973;867-887.
39. Nicholson W. Microeconomic Theory. 1992;The Dryden Press, Orlando, Florida.
40. Plosser C.I. Understanding real business cycles. Journal of Economic Perspectives. 3:1989;51-77.
41. Prescott E.C., Mehra R. Recursive competitive equilibrium. the case of homogeneous households Econometrica. 48:1980;1365-1379.
42. Rogerson R. Indivisible labor, lotteries and equilibrium. Journal of Monetary Economics. 21:1988;3-16.
43. Rouwenhorst, K.G., 1995. Asset pricing implications of equilibrium business cycle models. In: Cooley, T.H. (Ed.), Frontiers of Business Cycle Research. Princeton University Press, Princeton, New Jersey.
44. Storesletten, K., Telmer, C., Yaron, A., 1998. Persistent idiosyncratic shocks and incomplete markets. Working Paper. Carnegie Mellon University, Pittsburgh, PA.
45. Svensson L.E.O., Werner I.M. Nontraded assets in incomplete markets. European Economic Review. 37:1993;1149-1168.