An Isomorphism Between Asset Pricing Models With and Without Linear Habit Formation

2000 ◽  
Author(s):  
Mark Schroder ◽  
Costis Skiadas
Keyword(s):  
Asset Pricing ◽  
Habit Formation ◽  
Pricing Models ◽  
Asset Pricing Models

scholarly journals NONPARAMETRIC IDENTIFICATION OF POSITIVE EIGENFUNCTIONS

2014 ◽  
Vol 31 (6) ◽  
pp. 1310-1330 ◽  
Author(s):  
Timothy M. Christensen
Keyword(s):  
Asset Pricing ◽  
Habit Formation ◽  
Linear Operators ◽  
Nondegeneracy Condition ◽  
Pricing Models ◽  
Nonparametric Models ◽  
Asset Pricing Models ◽  
Long Run ◽  
Dynamic Asset Pricing ◽  
Long Run Risk

Important features of certain economic models may be revealed by studying positive eigenfunctions of appropriately chosen linear operators. Examples include long-run risk–return relationships in dynamic asset pricing models and components of marginal utility in external habit formation models. This paper provides identification conditions for positive eigenfunctions in nonparametric models. Identification is achieved if the operator satisfies two mild positivity conditions and a power compactness condition. Both existence and identification are achieved under a further nondegeneracy condition. The general results are applied to obtain new identification conditions for external habit formation models and for positive eigenfunctions of pricing operators in dynamic asset pricing models.

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