Asset Pricing Based on Micro Consumption
Mon, Oct 25, 2021
Speaker: JU Gaosheng
Date: 12:00-13:00, 26th October 2021
Venue: Room 306, Tongji Building A
Abstract:
This paper proposes an estimable asset pricing model that builds upon micro consumption and reference-dependent preference. Central to the model is an S-shaped consumption utility function that is convex below the reference point. The model quantitatively accounts for both low risk-free rates and high equity premiums. The S-shaped consumption utility works by rationalizing the micro-level finding that, for many people, the low quantiles of consumption growth correlate negatively with asset returns.
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