Benchmarks in Aggregate Household Portfolios

Pascal St-Amour

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: Reference-dependent preference models assume that agents derive utility from deviations of consumption from benchmark levels, rather than from consumption levels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by Prospect Theory). For both cases, we specify and estimate a fully structural multi-variate Brownian system in optimal consumption, portfolio and wealth using aggregate household financial and real estate wealth data. Our results reveal that references are (i) strongly relevant, (ii) state-dependent, and (iii) that the data is more consistent with the backward- than the forward-looking reference model.

Keywords: portfolio choice; reference-dependent utility; habit; prospect; estimation of diffusion processes (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2007-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/07.07.pdf (application/pdf)

Related works:
Working Paper: Benchmarks in Aggregate Household Portfolios (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:lau:crdeep:07.07

Access Statistics for this paper

More papers in Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie Université de Lausanne, Faculté des HEC, Département d’économie, Internef, CH-1015 Lausanne. Contact information at EDIRC.
Bibliographic data for series maintained by Christina Seld ().