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Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets

Chacko, George - 2010

This paper analyzes optimal portfolio choice and consumption with stochastic volatility in incomplete markets. Using the Duffie-Epstein (1992) formulation of recursive utility in continuous time, it shows that the optimal portfolio demand for stocks under stochastic volatility varies strongly...

Persistent link: https://www.econbiz.de/10012763770

Intertemporal Substitution in Macroeconomics

Mankiw, Nicholas Gregory - 2011

time but not necessarily additively separable in consumption and leisure. We estimate three first order conditions which …, present leisure for future leisure and present consumption for present leisure. Our results show that the aggregate U.S. data … imply that either consumption or leisure is an inferior good …

Persistent link: https://www.econbiz.de/10013132070

Precautionary Saving and Consumption Smoothing Across Time and Possibilities

Kimball, Miles S.; Weil, Philippe - 2021

This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two-period model with Selden/Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive which...

Persistent link: https://www.econbiz.de/10013228024

Intertemporal Substitution in Consumption

Hall, Robert E. - 2021

Does a higher real interest rate induce significant postponement of consumption? According to the theory developed here, this question can be answered by studying the relation between the rate of growth of consumption and expected real interest rates. In postwar data for the United States,...

Persistent link: https://www.econbiz.de/10013222936

Taxes and Time Allocation : Evidence from Single Women and Men

Gelber, Alexander M.; Mitchell, Joshua - 2011

Hundreds of papers have investigated how incentives and policies affect hours worked in the market. This paper examines how income taxes affect time allocation in the other two-thirds of the day. Using the Panel Study of Income Dynamics from 1975 to 2004, we analyze the response of single...

Persistent link: https://www.econbiz.de/10014045896

International Portfolio Allocation Under Model Uncertainty

Benigno, Pierpaolo - 2010

This paper proposes an explanation of the international home bias in equity based on ambiguity aversion. Doubts imply an additional hedging motif driven by the interaction between real exchange rate risk and ambiguity aversion. What matters is the long-run as opposed to the short-run risk....

Persistent link: https://www.econbiz.de/10012757854

Capital Deepening and Non-Balanced Economic Growth

Acemoglu, Daron - 2010

This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share, but simultaneously induces a...

Persistent link: https://www.econbiz.de/10012760696

Can Weak Substitution Be Rehabilitated?

Smith, V. Kerry - 2012

This paper develops a graphical analysis and an analytical model that demonstrate how weak substitution can be used for non-market valuation. Both weak complementarity and weak substitution can be evaluated as restrictions that allow quantity or quality changes in non-market goods to be...

Persistent link: https://www.econbiz.de/10012755207

A Parsimonious Macroeconomic Model for Asset Pricing

Guvenen, Fatih - 2010

In this paper, I study asset prices in a two-agent macroeconomic model with two key features: limited participation in the stock market and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The model is consistent with some prominent features of asset prices...

Persistent link: https://www.econbiz.de/10013151373

Computing DSGE Models with Recursive Preferences

Caldara, Dario - 2010

This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with recursive preferences such as those in Epstein and Zin (1989 and 1991). Models with these preferences have recently become popular, but we know little about...

Persistent link: https://www.econbiz.de/10013152598