Concave Consumption, Euler Equations and Inference with Estimating Functions
نویسنده
چکیده
The constant relative risk aversion (CRRA) type utility functions are used in consumption-based capital asset pricing models (C-CAPM) and are estimated by the generalized method of moments (GMM). More realistic hyperbolic absolute risk aversion (HARA) utility functions are analytically inconvenient. We show how to estimate HARA-based CCAPM models by employing Godambe-Durbin \estimating functions"(EFs) from 1960. We also show that the EFs, which are receiving considerable new attention in Statistics, imply new asymptotic inference methods. Fisher, working before the era of computers, used analytically structured pivots. Efron and Hinkley (1978) and Royall (1986) remove some structure. Following Vinod (1996b) we show how to remove almost all removable structure. Our data suggest a concave consumption function.
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