Reference–dependent preference models assume that agents derive utility fromdeviations of consumption from benchmark levels, rather than from consumptionlevels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by...

This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...

This paper analyzes the important time variation in U.S. aggregate portfolio allocations. To do so, we first use flexible descriptions of preferences and investment opportunities to derive optimal decision rules that nest tactical, myopic, and strategic portfolio allocations. We then compare...