An Estimation of Economic Models with Recursive Preferences

Xiaohong Chen (), Jack Favilukis and Sydney Ludvigson

No 17130, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 the unobservable aggregate wealth return. Our empirical results indicate that the estimated relative risk aversion parameter ranges from 17-60, with higher values for aggregate consumption than for stockholder consumption, while the estimated elasticity of intertemporal substitution is above one. In addition, the estimated model-implied aggregate wealth return is found to be weakly correlated with the CRSP value-weighted stock market return, suggesting that the return to human wealth is negatively correlated with the aggregate stock market return.

JEL-codes: E21 G12 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-dge, nep-mac and nep-upt
Note: AP EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as “An Estimation of Recursive Preferences,” (with Jack Favilukis and Xiaohong Chen), in Quantitative Economics (forthcoming).

Downloads: (external link)
http://www.nber.org/papers/w17130.pdf (application/pdf)

Related works:
Journal Article: An estimation of economic models with recursive preferences (2013)
Working Paper: An estimation of economic models with recursive preferences (2013)
Working Paper: An estimation of economic models with recursive preferences (2012)
Working Paper: An Estimation of Economic Models with Recursive Preferences (2012)
Working Paper: An estimation of economic models with recursive preferences (2012)
Working Paper: An estimation of economic models with recursive preferences (2007)
Working Paper: An Estimation of Economic Models with Recursive Preferences (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17130

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17130

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().