Motivated by the success of internal habit formation preferences in explaining asset-pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labour income risk and stock-market participation costs. In...

We study the infinite horizon model of household portfolio choice under liquidity constraints and revisit the portfolio specialization puzzle for impatient consumers with access to riskless and risky assets. We consider a labour income process that allows us to decompose the consumption and...

Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In...

The non-negativity constraint on inventories imposed on the rational expectations theory of speculative storage implies that the conditional mean and variance of commodity prices are non-linear in lagged prices and have a kink at a threshold point. In this paper, the structural parameters of...

We study a two-sector general equilibrium model of housing andnon-housing production where heterogenous households face limitedopportunities to insure against aggregate and idiosyncratic risks. Themodel generates large variability in the national house price-rentratio, both because it fluctuates...

This paper presents estimates of key preference parameters of the Epstein and Zin (1989, 1991) and Weil (1989) (EZW) recursive utility model, evaluates the model’s ability to fit asset return data relative to other asset pricing models, and investigates the implications of such estimates for...