Intertemporal Asset Pricing Without Consumption Data

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper proposes a new way to generalize the insights of stark asset pricing theory to a multiperiod setting. The paper uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model. In a homoscedastic lognormal setting, the consumption-wealth ratio is shown to depend on the elasticity of intertemporal substitution in consumption, while asset risk premia are determined by the coefficient of relative risk aversion. Risk premia are related to the covariances of asset returns with the market return and with news about the discounted value of all future market returns.

Date: 1993
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Published in American Economic Review

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Related works:
Journal Article: Intertemporal Asset Pricing without Consumption Data (1993)
Working Paper: Intertemporal Asset Pricing Without Consumption Data (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3221491

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