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dc.contributor.authorWachter, Jessica A.-
dc.date.accessioned2008-05-26T22:14:50Z-
dc.date.available2008-05-26T22:14:50Z-
dc.date.issued2002-05-15-
dc.identifier.urihttp://hdl.handle.net/2451/26565-
dc.description.abstractThis paper proposes a habit formation model that explains the failure of the expectations hypothesis documented by Campbell and Shiller (1991) and Fama and Bliss (1987). The model also produces positive excess returns on long-term bonds, an upward sloping average yield curve, and allows for realistic levels of time-variation in the mean of consumption growth. The model generates a novel empirical prediction: Long lags of consumption growth predict the short-term interest rate with a negative sign. This prediction is shown to be strongly supported by the data.en
dc.language.isoen_USen
dc.relation.ispartofseriesFIN-01-024en
dc.titleHabit Formation and Returns on Bonds and Stocksen
dc.typeWorking Paperen
Appears in Collections:Finance Working Papers

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