This paper examines the relationship between consumption-based and option-based risk-neutral moments, providing a technique to explore consumption-based pricing kernel specifications using data from the options markets. Estimators for average risk-neutral moments of each type are proposed and implemented. Option-based average risk-neutral moments are estimated for S&P500 returns using S&P500 fu...

Consumption is the principal feature of Iran’s Gross National Production. Therefore, recognizing of factors that influence it is quite crucial. This article, investigates habit formation, durability, relative risk aversion and intertemporal substitution in consumption expenditures of Iranian households. For empirical study, at first, we constructed two weighted portfolio of the main assets re...

Abstract We estimate a New Keynesian model on postwar U.S. data with the generalized method of moments using either constant or time‐varying debt and distortionary labor income taxes. show that accounting for government taxes help match level nominal term premium lower relative risk‐aversion than typically found in literature.

We prove the existence of equilibrium in a continuous-time nance model; our results include the case of dynamically incomplete markets as well as dynamically complete markets. In addition, we derive explicitly the stochastic process describing securities prices. The price process depends on the risk-aversion characteristics of the utility function, as well as on the presence of additional sourc...

Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto’s wealth power law distribution. One important factor to be considered is the existence of risk aversion. In this paper we study a model where agents posses different levels of risk aversion, going from uniform to a random distribution. In all cases the risk aversion ...

We suggest a simple asset market model in which we analyze competitive and strategic behavior simultaneously. If for competitive behavior two-fund separation holds across periods then it also holds for strategic behavior. In this case the relative prices of the assets do not depend on whether agents behave strategically or competitively. Those agents acting strategically will however invest les...

In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the optimal investment policy, its implied welfare, liquidity premium, and trading volume. At the first order, the liquidity premium equals the spread, times share ...