{"title":"对消费可预测性的偏好与股票溢价之谜","authors":"Steven P. Cassou , Jesús Vázquez","doi":"10.1016/j.iref.2025.104381","DOIUrl":null,"url":null,"abstract":"<div><div>This paper provides a solution to the equity premium puzzle. We modify the standard constant relative risk aversion utility function by assuming that the representative consumer also has a preference for consumption predictability. While keeping the conditional mean of the stochastic discount factor close to one, this feature not only reinforces consumption smoothing, but it also results in large increases in the variability of the stochastic discount factor which is crucial for this solution to the puzzle. The large increase in variability for the stochastic discount factor in our modified model is primarily determined by large, realized consumption forecast errors. Although these oversized forecast errors arise infrequently, when they do arise, they result in very high aversion to risk and enhanced interest in smoothing consumption.</div></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":"103 ","pages":"Article 104381"},"PeriodicalIF":5.6000,"publicationDate":"2025-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":"{\"title\":\"Preference for consumption predictability and the equity premium puzzle\",\"authors\":\"Steven P. Cassou , Jesús Vázquez\",\"doi\":\"10.1016/j.iref.2025.104381\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"<div><div>This paper provides a solution to the equity premium puzzle. We modify the standard constant relative risk aversion utility function by assuming that the representative consumer also has a preference for consumption predictability. While keeping the conditional mean of the stochastic discount factor close to one, this feature not only reinforces consumption smoothing, but it also results in large increases in the variability of the stochastic discount factor which is crucial for this solution to the puzzle. The large increase in variability for the stochastic discount factor in our modified model is primarily determined by large, realized consumption forecast errors. Although these oversized forecast errors arise infrequently, when they do arise, they result in very high aversion to risk and enhanced interest in smoothing consumption.</div></div>\",\"PeriodicalId\":14444,\"journal\":{\"name\":\"International Review of Economics & Finance\",\"volume\":\"103 \",\"pages\":\"Article 104381\"},\"PeriodicalIF\":5.6000,\"publicationDate\":\"2025-07-19\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"\",\"citationCount\":\"0\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"International Review of Economics & Finance\",\"FirstCategoryId\":\"96\",\"ListUrlMain\":\"https://www.sciencedirect.com/science/article/pii/S1059056025005441\",\"RegionNum\":2,\"RegionCategory\":\"经济学\",\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"Q1\",\"JCRName\":\"BUSINESS, FINANCE\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Economics & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1059056025005441","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
Preference for consumption predictability and the equity premium puzzle
This paper provides a solution to the equity premium puzzle. We modify the standard constant relative risk aversion utility function by assuming that the representative consumer also has a preference for consumption predictability. While keeping the conditional mean of the stochastic discount factor close to one, this feature not only reinforces consumption smoothing, but it also results in large increases in the variability of the stochastic discount factor which is crucial for this solution to the puzzle. The large increase in variability for the stochastic discount factor in our modified model is primarily determined by large, realized consumption forecast errors. Although these oversized forecast errors arise infrequently, when they do arise, they result in very high aversion to risk and enhanced interest in smoothing consumption.
期刊介绍:
The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.