Asset Returns and Intertemporal Preferences
Shmuel Kandel and
Robert Stambaugh
No 3633, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
A representative-agent model with time-varying moments of consumption growth is used to analyze implications about means and volatilities of asset returns as well as the predictability of asset returns for various investment horizons. A comparative-statics analysis using non-expected-utility preferences indicates that, although risk aversion is important in determining the means of both equity returns and interest rates, implications about the volatility and the predictability of equity returns are affected primarily by intertemporal substitution. Lower elasticities of intertemporal substitution are associated with greater variance in the temporary component of equity prices.
Date: 1991-02
Note: ME
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Published as Journal of Monetary Economics, Vol. 27 No. 1, pp. 39-71, February 1991.
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Journal Article: Asset returns and intertemporal preferences (1991)
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