Nonaddictive Habit Formation and the Equity Premium Puzzle |
Common terms and phrases
Abel Bank of Atlanta C₁ C₂ change in wealth coefficient of relative comparative dynamics complementarity cone Constantinides 1990 consumer consumer-investors consumption growth CRRA current consumption rate dc(t decreases Detemple and Zapatero discount rate Duesenberry 1967 equity premium puzzle expected utility external habit Federal Reserve Bank Fishburn and Kochenberger geometric Brownian motion habit-formation parameter habit-forming consumption rate indicator function intensity of habit investment opportunity set Kochenberger 1979 marginal utility Mehra and Prescott Monte Carlo method nonaddictive habit formation notion of habit optimal consumption policy past consumption rate proportional costs rate of consumption ratio real riskless interest real riskless rate reducing consumption relative risk aversion representative agent resolve the equity result risk premium riskless interest rate Sailesh Ramamurtie sense of deprivation set-up simulations solution standard deviation stochastic differential equation Sundaresan 1989 utility function utility maximization problem utility of consumption utility penalty utility reward wealth process