Purpose of the study: This study examines influence investment decisions and consumption on asset pricing from 1980 to 2016.
 Methodology: has used a quantitative research design secondary source is deployed collect data 2016. The was gathered Saint Louis Fed, whereas Standard Poor’s 500 (S&P index at closing price first day month) Yahoo Finance. software for analysis R Studio statisti...

I investigate empirically the ability of financial market incompleteness to help explaining the equity premium puzzle. I estimate the non-diversifiable component of the cross-sectional volatility of income and examine its cyclical properties. Equipped with these estimates, I compute the implied equilibrium Sharpe-ratio of excess returns and evaluate the ability of idiosyncratic risk to improve ...

This paper examines the optimal consumption and investment problem for a ‘large’ investor, whose portfolio choices affect the instantaneous expected returns on the traded assets. Alternatively, our analysis can be interpreted in terms of an optimal growth problem with nonlinear technologies. Existence of optimal policies is established using martingale and duality techniques under general assum...

Hyperbolic absolute risk aversion (HARA) utility, (See is a more Carroll and Kimball, 1996), realistic alternative to the power utility used in consumption-based capital asset pricing models (CCAPM). We propose a new estimator for the HARA based on Godambe-Durbin “estimating functions” and small sigma asymptotics (SSA). This is an alternative to the generalized method of moments (GMM). Since th...

Recent evidence indicates the new goods bias in the Consumer Price Index is large and cyclical (Broda and Weinstein, 2010). Because standard theory prices assets by the discounted value of real payoffs, these findings have implications for asset pricing. In this paper, I use the growth of dynamic goods—goods subject to more innovation—as a proxy for the growth of new goods, and include this as ...