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- Publisher
- Oxford University Press
- Copyright
- © The Author 2016. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oup.com
- ISSN
- 2045-9920
- eISSN
- 2045-9939
- DOI
- 10.1093/rapstu/raw001
- Publisher site
- See Article on Publisher Site
Abstract
AbstractWe analyze the contribution of leisure preferences to a model of long-run risks in leisure and consumption growth. The marginal utility of consumption is affected by short- and long-run risks in leisure under nonseparable and recursive preferences. We match equity risk premia and macroeconomic moments with plausible coefficients of relative-risk aversion. Additionally, the model generates a less negative to positively sloped average real yield curve, depending on the elasticity of substitution between the consumption of nondurables and services and leisure. Further, the incorporation of leisure in utility allows us to derive model implications for the return on human capital.Received October 11, 2011; accepted December 24, 2015 by Editor Wayne Ferson.
Journal
The Review of Asset Pricing Studies – Oxford University Press
Published: Jun 1, 2016