Saving-based asset-pricing
Abstract
This paper explores the implications of a novel class of preferences for the behavior of asset prices. Following a suggestion by Marshall (1920), we entertain the possibility that people derive utility not only from consumption, but also from the very act of saving. These "saving-based" preferences are related to models of habit formation and the spirit of capitalism, but incorporate the feature that people have anticipatory habits because they care about the future accumulation of wealth. We derive the Euler equations for these preferences and estimate them with GMM. Our estimates suggest that the preference for saving is economically significant. © 2013 Elsevier B.V.
Publication Title
Journal of Banking and Finance
Recommended Citation
Dreyer, J., Schneider, J., & Smith, W. (2013). Saving-based asset-pricing. Journal of Banking and Finance, 37 (9), 3704-3715. https://doi.org/10.1016/j.jbankfin.2013.04.034
