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Asset Pricing With Multiplicative Habit and Power-Expo Preferences

Author

Listed:
  • William T. Smith

    (Department of Economics, Fogelman College of Business & Economics, University of Memphis)

  • Qiang Zhang

    (Department of Economics, Fogelman College of Business & Economics, University of Memphis)

Abstract
Multiplicative habit introduces an additional consumption risk as a determinant of equity premium, and allows time preference and habit strength, in addition to risk aversion, to affect "price of risk". A model combining multiplicative habit and power-expo preferences cannot be rejected.

Suggested Citation

  • William T. Smith & Qiang Zhang, 2006. "Asset Pricing With Multiplicative Habit and Power-Expo Preferences," CIRJE F-Series CIRJE-F-429, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2006cf429
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2006/2006cf429.pdf
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    References listed on IDEAS

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    Cited by:

    1. William T. Smith, 2023. "The optimal hedge ratio: A closed-form solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 43(2), pages 748-758.
    2. Giannikos, Christos I. & Koimisis, Georgios, 2021. "Habits, Wealth and Equity Risk Premium," Finance Research Letters, Elsevier, vol. 38(C).
    3. Dreyer, Johannes K. & Schneider, Johannes & Smith, William T., 2013. "Saving-based asset-pricing," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3704-3715.
    4. Natalia, Khorunzhina & Wayne Roy, Gayle, 2011. "Heterogenous intertemporal elasticity of substitution and relative risk aversion: estimation of optimal consumption choice with habit formation and measurement errors," MPRA Paper 34329, University Library of Munich, Germany.
    5. van Bilsen, Servaas & Linders, Daniël, 2019. "Affordable and adequate annuities with stable payouts: Fantasy or reality?," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 19-42.
    6. William T. Smith, 2022. "The optimal hedge ratio: A solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 42(2), pages 877-888.

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