Asset pricing with multiplicative habit and power-expo preferences

Authors

William T. Smith, University of Memphis
Qiang Zhang, University of Memphis

Abstract

Multiplicative habit introduces an additional consumption risk as a determinant of the equity premium, and allows time preference and habit strength, in addition to risk aversion, to affect "the price of risk." A model combining multiplicative habit and power-expo preferences cannot be rejected. © 2006 Elsevier B.V. All rights reserved.

Publication Title

Economics Letters

Recommended Citation

Smith, W., & Zhang, Q. (2007). Asset pricing with multiplicative habit and power-expo preferences. Economics Letters, 94 (3), 319-325. https://doi.org/10.1016/j.econlet.2006.10.015