Dynamic Quantile Models of Rational Behavior

• 成果类型: Article
• 署名作者: de Castro, Luciano; Galvao, Antonio F.
• 署名单位: University of Iowa; University of Arizona
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA15146
• 发表日期: 2019
• 页码: 1893-1939
• 关键词: TEMPORAL BEHAVIOR; risk-aversion; life-cycle; intertemporal substitution; ordinal utility; asset returns; consumption; identification; uncertainty; gmm

摘要

This paper develops a dynamic model of rational behavior under uncertainty, in which the agent maximizes the stream of future tau-quantile utilities, for tau is an element of (0,1). That is, the agent has a quantile utility preference instead of the standard expected utility. Quantile preferences have useful advantages, including the ability to capture heterogeneity and allowing the separation between risk aversion and elasticity of intertemporal substitution. Although quantiles do not share some of the helpful properties of expectations, such as linearity and the law of iterated expectations, we are able to establish all the standard results in dynamic models. Namely, we show that the quantile preferences are dynamically consistent, the corresponding dynamic problem yields a value function, via a fixed point argument, this value function is concave and differentiable, and the principle of optimality holds. Additionally, we derive the corresponding Euler equation, which is well suited for using well-known quantile regression methods for estimating and testing the economic model. In this way, the parameters of the model can be interpreted as structural objects. Therefore, the proposed methods provide microeconomic foundations for quantile regression methods. To illustrate the developments, we construct an intertemporal consumption model and estimate the discount factor and elasticity of intertemporal substitution parameters across the quantiles. The results provide evidence of heterogeneity in these parameters.