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Time Nonseparability in Aggregate Consumption: International Evidence

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  • Phillip A. Braun
  • George M. Constantinides
  • Wayne E. Ferson

Abstract

We study consumption-based asset pricing models which allow for both habit persistence and durability of consumption goods. using quarterly consumption and asset return data for six countries. We estimate the parameters representing habit persistence or durability. risk version and time preference for each of the countries. We find that time-nonseparable preferences improve the fit of the model. When the nonseparability parameter is statistically significant. its magnitude indicates that the effect of habit persistence dominates the effect of durability in consumption expenditures. However. the international evidence for habit persistence is weaker than it is for the United States. The results indicate that the simple model of time nonseparability does not provide a satisfactory explanation of consumption and asset returns.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4104.

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Date of creation: Jun 1992
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Publication status: published as European Economic Review, Vol. 37, no. 5 (1993): 897-920.
Handle: RePEc:nbr:nberwo:4104

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