@ARTICLE{19081703_1999,
author = {Campbell, John Y. and Cochrane, John H.},
keywords = {asset pricing, CAPM, equity premium, habit, power utility model},
title = {By Force of Habit: A Consumption-Based Explanation of Aggregate Stock
Market Behavior },
journal = {Journal of Political Economy},
year = {1999},
month = {},
volume = {107},
number = {2},
pages = {205-251},
url = {http://ecsocman.hse.ru/text/19081703/},
publisher = {},
language = {ru},
abstract = {We present a consumption-based model that explains the procyclical
variation of stock prices, the long-horizon predictability of excess
stock returns, and the countercyclical variation of stock market
volatility. Our model has an i.i.d. consumption growth driving
process, and adds a slow-moving external habit to the standard power
utility function. The latter feature produces cyclical variation in
risk aversion, and hence in the prices of risky assets Our model also
predicts many of the difficulties that beset the standard power
utility model, including Euler equation rejections, no correlation
between mean consumption growth and interest rates, very high
estimates of risk aversion, and pricing errors that are larger than
those of the static CAPM. Our model captures much of the history of
stock prices, given only consumption data. Since our model captures
the equity premium, it implies that fluctuations have important
welfare costs. Unlike many habit-persistence models, our model does
not necessarily produce cyclical variation in the risk free interest
rate, nor does it produce an extremely skewed distribution or
negative realizations of the marginal rate of substitution },
annote = {We present a consumption-based model that explains the procyclical
variation of stock prices, the long-horizon predictability of excess
stock returns, and the countercyclical variation of stock market
volatility. Our model has an i.i.d. consumption growth driving
process, and adds a slow-moving external habit to the standard power
utility function. The latter feature produces cyclical variation in
risk aversion, and hence in the prices of risky assets Our model also
predicts many of the difficulties that beset the standard power
utility model, including Euler equation rejections, no correlation
between mean consumption growth and interest rates, very high
estimates of risk aversion, and pricing errors that are larger than
those of the static CAPM. Our model captures much of the history of
stock prices, given only consumption data. Since our model captures
the equity premium, it implies that fluctuations have important
welfare costs. Unlike many habit-persistence models, our model does
not necessarily produce cyclical variation in the risk free interest
rate, nor does it produce an extremely skewed distribution or
negative realizations of the marginal rate of substitution }
}