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Intertemporal Asset Pricing without Consumption Data

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  • Campbell, John Y

Abstract

This paper proposes a new way to generalize the insights of static asset pricing theory to a multiperiod setting. The paper uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model. In a homoskedastic lognormal setting, the consumption-wealth ratio is shown to depend on the elasticity of intertemporal substitution in consumption, while asset risk premia are determined by the coefficient of relative risk aversion. Risk premia are related to the covariances of asset returns with the market return and with news about the discounted value of all future market returns. Copyright 1993 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 83 (1993)
Issue (Month): 3 (June)
Pages: 487-512

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Handle: RePEc:aea:aecrev:v:83:y:1993:i:3:p:487-512

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