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Asset pricing with multiplicative habit and power-expo preferences

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  • Smith, William T.
  • Zhang, Qiang

Abstract

Multiplicative habit introduces an additional consumption risk as a determinant of equity premium, and allows time preference and habit strength, in addition to risk aversion, to affect "price of risk". A model combining multiplicative habit and power-expo preferences cannot be rejected.
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Suggested Citation

  • Smith, William T. & Zhang, Qiang, 2007. "Asset pricing with multiplicative habit and power-expo preferences," Economics Letters, Elsevier, vol. 94(3), pages 319-325, March.
    • Handle: RePEc:eee:ecolet:v:94:y:2007:i:3:p:319-325
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    Cited by:

    1. Dreyer, Johannes K. & Schneider, Johannes & Smith, William T., 2013. "Saving-based asset-pricing," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3704-3715.
    2. Natalia, Khorunzhina & Wayne Roy, Gayle, 2011. "Heterogenous intertemporal elasticity of substitution and relative risk aversion: estimation of optimal consumption choice with habit formation and measurement errors," MPRA Paper 34329, University Library of Munich, Germany.
    3. William T. Smith, 2022. "The optimal hedge ratio: A solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 42(2), pages 877-888.
    4. William T. Smith, 2023. "The optimal hedge ratio: A closed-form solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 43(2), pages 748-758.
    5. Giannikos, Christos I. & Koimisis, Georgios, 2021. "Habits, Wealth and Equity Risk Premium," Finance Research Letters, Elsevier, vol. 38(C).
    6. van Bilsen, Servaas & Linders, Daniël, 2019. "Affordable and adequate annuities with stable payouts: Fantasy or reality?," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 19-42.

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