English, Article, Journal or magazine article edition: Temptation and Self-Control: Some Evidence from the Consumer Expenditure Survey Kevin X.D. Huang; Zheng Liu; Qi Zhu

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Bookmark: http://trove.nla.gov.au/version/56382
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Temptation and Self-Control: Some Evidence from the Consumer Expenditure Survey
Author
  • Kevin X.D. Huang
  • Zheng Liu
  • Qi Zhu
Physical Description
  • preprint
Notes
  • Temptation, Self-Control, Gul-Pesendorfer Preferences, Asset Pricing
  • RePEc:red:sed005:770
  • This paper empirically estimates a balanced-growth consistent, dynamic, structural model of intertemporal consumption and asset pricing that allows for, but does not assume, the Gul-Pesendorfer preferences of temptation and self-control, using synthetic panel data constructed from the Consumer Expenditure Survey. One novelty of our model is that the cross-sectional distribution of wealth-consumption ratio is a potentially important determinant for the implied pricing kernel, additional to the cross-sectional distribution of consumption growth, while the importance of this additional factor depends on the strength of temptation and self-control. The estimates that we obtain provide evidence supporting the existence of temptation and self-control in preferences. With reasonable precision, we estimate a significant present-biased temptation strength, and we reject the null hypothesis of no temptation at common confidence levels. We explore the quantitative implications of the self-control problems for equity premium, risk-free rate, and asset price volatility.
  • RePEc:emo:wp2003:0507
Language
  • English
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