Intertemporal Consumption Choices, Transaction Costs and Limited Participation in Financial Markets: Reconciling Data and Theory
Orazio Attanasio () and
Discussion Papers from D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy
This paper builds a unifying framework based on the theory of intertemporal consumption choices that brings together the limited participation-based explanation of the C-CAPM poor empirical per- formance and the transaction costs-based explanation of incomplete portfolios. Using the implications of the consumption model and ob- served household consumption and portfolio choices, we identify the preference parameters of interest and a lower bound for the costs ra- tionalizing non-participation in nancial markets. Using the US Con- sumer Expenditure Survey and assuming isoelastic preferences, we es- timate the coe¢ cient of relative risk aversion at 1.7 and a cost bound of 0.4 percent of non-durable consumption. Our estimate of the pref- erence parameter is theoretically plausible and the bound su¢ ciently small to be likely to be exceeded by the actual total (observable and unobservable) costs of participating in nancial markets.
Keywords: limited participation in financial markets; fi xed participation costs; Euler equation for consumption (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to economia.uniparthenope.it:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)
Journal Article: Intertemporal consumption choices, transaction costs and limited participation in financial markets: reconciling data and theory (2011)
Working Paper: Intertemporal Consumption Choices, Transaction Costs and Limited Participation in Financial Markets: Reconciling Data and Theory (2007)
Working Paper: Intertemporal Consumption Choices, Transaction Costs and Limited Participation to Financial Markets: Reconciling Data and Theory (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:prt:dpaper:1_2008
Access Statistics for this paper
More papers in Discussion Papers from D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy Contact information at EDIRC.
Bibliographic data for series maintained by Antonietta Milano ().