The wealth-consumption ratio and the consumption-habit ratio

Journal of Business and Economic Statistics

Volumn 23, Issue 2, 2005, Pages 226-241

  Li, Yuming ^a  

^a CALIFORNIA STATE UNIVERSITY   (United States)

Author keywords

External habit formation; Long horizon return; Present value relations; Time varying moments of consumption; Vector autoregression

Indexed keywords

EID: 17544365559     PISSN: 07350015     EISSN: None     Source Type: Journal    
DOI: 10.1198/073500104000000361     Document Type: Article

References (30)

1. Abel, A. B. (1990), "Asset Prices Under Habit Formation and Catching up With the Joneses," American Economic Review Papers and Proceedings, 80, 38-42.
2. Breeden, D. T., Gibbons, M. R., and Litzenberger, R. H. (1989), "Empirical Tests of the Consumption-Oriented CAPM," Journal of Finance, 44, 231-262.
3. Campbell, J. Y. (1991), "A Variance Decomposition for Stock Returns," Economic Journal, 101, 157-179.
4. _ (1993), "Intertemporal Asset Pricing Without Consumption Data," American Economic Review, 83, 487-512.
5. Campbell, J. Y., and Cochrane, J. H. (1999), "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, 107, 205-252.
6. Campbell, J. Y., Lo, A. W., and MacKinlay, A. C. (1997), The Econometrics of Financial Markets, Princeton, NJ: Princeton University Press.
7. Campbell, J. Y., and Shiller, R. J. (1988), "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," Review of Financial Studies, 1, 195-227.
8. Cochrane, J. H. (1992), "Explaining the Variance of Price-Dividend Ratios," Review of Financial Studies, 15, 243-280.
9. Constantinides, G. M. (1990), "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, 98, 519-543.
10. Detemple, J. B., and Zapatero, F. (1991), "Asset Prices in an Exchange Economy With Habit Formation," Econometrica, 59, 1633-1657.
11. Fama, E. F., and French, K. R. (1988), "Dividend Yields and Expected Stock Returns," Journal of Financial Economics, 22, 3-25.
12. _ (1989), "Business Conditions and Expected Returns on Stocks and Bonds," Journal of Financial Economics, 25, 23-49.
13. Person, W., E., and Constantinides, G. M. (1991), "Habit Formation and Durability in Aggregate Consumption: Empirical Tests," Journal of Financial Economics, 29, 199-240.
14. Ferson, W. E., and Harvey, C. R. (1992), "Seasonally and Consumption-Based Asset Pricing," Journal of Finance, 47, 511-552.
15. _ (1993), "The Risk and Predictability of International Equity Returns," Review of Financial Studies, 6, 527-566.
16. Hansen, L. P. (1982), "Large-Sample Properties of Generalized Method-of-Moments Estimators," Econometrica, 50, 1029-1084.
17. Harvey, C. R. (1988), "The Real Term Structure and Consumption Growth," Journal of Financial Economics, 22, 305-334.
18. Heaton, J. (1993), "The Interaction Between Time-Nonseparable Preferences and Time Aggregation," Econometrica, 61, 353-385.
19. _ (1995), "An Empirical Investigation of Asset Pricing With Temporally Dependent Preference Specifications," Econometrica, 63, 681-717.
20. Hodrick, R. J. (1992), "Dividend Yields and Expected Stock Returns: Alternative Procedures for Inference and Measurement," Review of Financial Studies, 3, 357-386.
21. Kandel, S., and Stambaugh, R. F. (1990), "Expectations and Volatility of Consumption and Asset Returns," Review of Financial Studies, 3, 207-232.
22. _ (1991), "Asset Returns and Intertemporal Preferences," Journal of Monetary Economics, 27, 39-71.
23. Lettau, M., and Ludvigson, S. (2001 a), "Consumption, Aggregate Wealth and Expected Stock Returns," Journal of Finance, 56, 815-849.
24. _ (2001b), "Resurrecting the (C)CAPM: A Cross-sectional Test When Risk Premia Are Time-Varying," Journal of Political Economy, 109, 1238-1287.
25. Li, Y. (2001), "Expected Returns and Habit Persistence," Review of Financial Studies, 14, 861-899.
26. Li, Y., and Zhong, M. (2004), "Consumption Habit and International Stock Returns," Journal of Banking and Finance, forthcoming.
27. Newey, W. K., and West, K. D. (1987), "A Simple Positive Semi-Definite Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, 55, 703-708.
28. Sundaresan, S. M. (1989), "Intertemporally Dependent Preferences and the Volatility of Consumption and Wealth," Review of Financial Studies, 2, 73-88.
29. Tallarini, T., Jr., and Zhang, H. H. (2004), "External Habit and the Cyclically of Expected Stock Returns," Journal of Business, forthcoming.
30. Weil, P. (1989), "The Equity Premium Puzzle and the Risk-Free Rate Puzzle," Journal of Monetary Economics, 24, 401-421.