Abstract
We propose an equilibrium asset pricing model that incorporates the important characteristics of the habit formation model of Campbell and Cochrane (1999). The model can explain the term structures of both equity returns and interest rates, while maintains the ability to explain key time series properties of returns. It also matches the empirical facts on the Sharpe ratio for dividend strips and bonds. The key is to decompose the habit into two components. Overall, the model provides micro-foundations for the value premium.
| Original language | English |
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| Publication status | Published - 17 Dec 2019 |
| Event | 32nd Australasian Finance and Banking Conference - Sydney, Australia Duration: 16 Dec 2019 → 18 Dec 2019 Conference number: 32 https://www.business.unsw.edu.au/about/schools/banking-finance/seminars-conferences/australasian-finance-banking-conference https://www.business.unsw.edu.au/About-Site/Schools-Site/banking-finance-site/Documents/AFBC_Program_MAIN_web.pdf https://bankinglibrary.com/32nd-australasian-finance-and-banking-conference-afbc/ |
Conference
| Conference | 32nd Australasian Finance and Banking Conference |
|---|---|
| Abbreviated title | AFBC 2019 |
| Country/Territory | Australia |
| City | Sydney |
| Period | 16/12/19 → 18/12/19 |
| Internet address |
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Research Keywords
- Habit formation
- term structure
- value premium