Expected Returns and the Business Cycle: Heterogeneous Goods and Time-Varying Risk Aversion

• 成果类型: Article
• 署名作者: Lochstoer, Lars A.
• 署名单位: Columbia University; University of London; London Business School
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhp045
• 发表日期: 2009
• 页码: 5251
• 关键词: CONSUMPTION-BASED EXPLANATION; EQUITY-PREMIUM; term structure; asset returns; habit; prices

摘要

This paper proposes a representative agent habit-formation model where preferences are defined for both luxury goods and basic goods. The model matches the equity risk premium, risk-free rate, and volatilities. From the intratemporal first-order condition, one can substitute out basic good consumption and the habit level, yielding a stochastic discount factor driven by two observable risk factors: luxury good consumption and the relative price of the two goods. I estimate these processes and find them to be heteroskedastic, implying time variation in the conditional volatility of the stochastic discount factor. These dynamics occur both at the business cycle frequency and at a lower, generational frequency. The findings reveal that the time variation in aggregate stock market and Treasury bond risk premiums are consistent with the predictions of the model.