Engsted, Tom; Hyde, Stuart; Møller, Stig V. - School of Economics and Management, University of Aarhus - 2007
On an international post World War II dataset, we use an iterated GMM pro- cedure to estimate and test the Campbell-Cochrane (1999) habit formation model. In addition, we analyze the predictive power of the surplus consumption ratio for future asset returns. We find that, although there are...