English, Article edition: Local Substitution and Habit Persistence: Matching the Moments of the Equity Premium and the Risk-Free Rate Olivier Allais

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/112418
Physical Description
  • article
Language
  • English

Edition details

Title
  • Local Substitution and Habit Persistence: Matching the Moments of the Equity Premium and the Risk-Free Rate
Author
  • Olivier Allais
Physical Description
  • article
Notes
  • This paper studies the empirical properties of introducing consumption complementarity and/​or substitutability over time in a Lucas-style asset pricing model. Specifically, I investigate whether the model can replicate a selected set of observed U.S. asset return moments over the 1890-1999 period. Firstly, I find that local substitution substantially improves the habit persistence model's ability to fit the asset return moments. Secondly, combined effects of local substitution and long-run complementarity over consumption nearly explain the equity premium and the risk-free rate means and volatilities. I conclude that both habit persistence and local substitution are required to solve the standard financial empirical puzzles. However, these results imply slightly high values of relative risk aversion in consumption and in wealth. (Copyright: Elsevier)
  • Habit persistence and local substitution, equity premium, risk-free rate and volatility puzzles
  • RePEc:red:issued:v:7:y:2004:i:2:p:265-296
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment