Intertemporal Substitution, Risk and the Time Series Behaviour of Consumption and Asset Returns

Stanley Zin

Working Paper from Economics Department, Queen's University

Abstract: This paper studies the time series behaviour of aggregate consumption and asset returns when the representative agent does not (necessarily) maximize the expected value of a von Neumann-Morgenstern utility index. By assuming that agent's intertemporal preferences over stochastic consumption sequences have the multiperiod analogue of the Ordinal Certainty Equivalent representation of Selden (1978, 1979), testable implications for the joint behaviour of consumption and assets returns are derived. These preferences contain the conventional von Neumann-Morgenstern representation as a special case and allow for "risk preference" and "time preference" to be modelled independently. The model is estimated and tested using monthly U.S. data on non-durable consumption, treasury bill returns, and corporate bond returns.

Pages: 36 pages
Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:qed:wpaper:694

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().