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Saving-Based Asset Pricing and Leisure

Author

Listed:
  • Johannes K. Dreyer

    (ISE, Roskilde University)

  • Johannes Schneider

    (WFI, Catholic University of Eichsta ̈tt)

  • William T. Smith

    (Department of Economics, University of Memphis)

Abstract

This paper integrates two strands of the asset-pricing literature. Dreyer et al. (2013) developed and estimated a model of "saving-based" preferences that provides a plausible resolution of the equity premium paradox; Uhlig (2007) has emphasized the importance of incorporating labor supply into models of asset pricing. Here we analyze the implications for asset pricing of incorporating non-separable leisure into a model with saving-based preferences. We derive the Euler equations for this class of preferences and show that our parameter estimates are statistically significant, indicating that investors possess both preferences for savings and for leisure in the American economy.

Suggested Citation

  • Johannes K. Dreyer & Johannes Schneider & William T. Smith, 2020. "Saving-Based Asset Pricing and Leisure," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 507-526, November.
    • Handle: RePEc:cuf:journl:y:2020:v:21:i:2:dreyerschneidersmith
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    References listed on IDEAS

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    Cited by:

    1. Kabderian Dreyer, Johannes & Smith, William, 2024. "Proportional warm-glow theory and asset pricing," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).

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    More about this item

    Keywords

    Equity premium puzzle; CCAPM; Leisure; Wealth; Saving-based preference; Asset pricing;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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