This paper characterizes the solution to a consumption/savings decision problem in which one of the consumption goods involves transaction costs. It then analyzes how such adjustment costs affect consumers' risk attitudes. Previous studies have suggested that transaction costs, by resulting in...

This paper embeds a staggered price feature into the standard speculative storage model of Deaton and Laroque (1996). Intermediate goods inventory speculators are added as an additional source of intertemporal linkage, which helps us to replicate the stylized facts of the observed commodity...

Arguing that total consumer wealth is unobservable, we invert the (approximate) consumption function to reconstruct, in a world with Kreps-Porteus generalized isoelastic preferences, i) the wealth that supports the agents’ observed consumption as an optimal outcome and ii) the rate of return...

This paper extends the methodology developed in Chien, Cole and Lustig (2011 & 2012) (hereafter CCL2011 and CCL2012, respectively) to analyze and compute the equilibria of economies with heterogeneous agents who have different asset trading technologies and are subject to both aggregate and...

We document some new stylised facts about how Australian homeowners value their homes using household panel data and unit-record data on home sale prices. We find that homeowners' price beliefs are unbiased at the postcode level, on average, although there is considerable dispersion in the...

This study proposes that heterogeneous household portfolio choices within a country and across countries offer an explanation for global imbalances. We construct a stochastic growth multi-country model in which heterogeneous agents face the following restrictions on asset trade. First, the...

I consider a consumption based asset pricing model where the consumer does not know if shocks to dividends are stationary (temporary) or non-stationary (permanent). The agent uses a Bayesian learning algorithm with a bias towards recent observations to assign probability to each process. While...

Rietz (1988) and Barro (2006) subject consumption and dividends to rare disasters in the growth rate. We extend their framework and subject consumption and dividends to rare disasters in the growth persistence. Wemodel growth persistence by means of two hidden types of economic slowdowns:...

This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk rationalizes large pricing errors, i.e. Euler equation errors. This result is remarkable, since Lettau and Ludvigson (2009) show that leading asset pricing models cannot explain sizeable...

Using a new dataset for the German market, this article analyses whether modeling time-varying stochastic discount factor parameters in the CAPM of Sharpe (1964), the HCAPM of Jagannathan and Wang (1996) and the CCAPM of Lucas (1978) can help to explain the cross-section of book-to-market, size...