Consumption-Based Asset Pricing: Durable Goods, Adjustment Costs, and Aggregation

2004 ◽  
Author(s):  
Stephan Siegel
Keyword(s):  
Asset Pricing ◽  
Durable Goods ◽  
Adjustment Costs

NOMINAL RIGIDITIES, RESIDENTIAL INVESTMENT, AND ADJUSTMENT COSTS

2009 ◽  
Vol 14 (1) ◽  
pp. 136-148 ◽  
Author(s):  
Charles T. Carlstrom ◽  
Timothy S. Fuerst
Keyword(s):  
General Equilibrium ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Durable Goods ◽  
Adjustment Costs ◽  
American Economic Review ◽  
Housing Construction ◽  
Residential Housing ◽  
Habit Persistence ◽  
Residential Investment

Evidence suggests that durable goods and residential housing are more flexibly priced than nondurables and services. Using a standard sticky price general equilibrium model, Barsky, House, and Kimball [American Economic Review 97(3) (2007), 984–998] demonstrate that if durable goods are flexibly priced and nondurables are sticky, then a monetary contraction leads to an expansion in production in the durable sector. This is wildly at odds with the empirical evidence. This paper demonstrates that if three features are added to the model (sticky nominal wages, housing construction adjustment costs, and habit persistence in consumption), it delivers sectoral implications that are broadly consistent with the data.

scholarly journals Labor and the Market Value of the Firm

2007 ◽  
Vol 97 (4) ◽  
pp. 1419-1431 ◽  
Author(s):  
Monika Merz ◽  
Eran Yashiv
Keyword(s):  
Asset Pricing ◽  
Dynamic Behavior ◽  
Investment Decisions ◽  
Market Value ◽  
Adjustment Costs ◽  
Pricing Model ◽  
Corporate Sector ◽  
Asset Pricing Model ◽  
Sector Data ◽  
Forward Looking

What role does labor play in firms' market value? We use a production-based asset pricing model with factor adjustment costs and forward-looking agents to explore this question. We posit that the hiring of labor is akin to investment in capital and that the two interact, with the interaction being a crucial determinant of the dynamic behavior of market value. Using aggregate US corporate sector data, we estimate firms' optimal hiring and investment decisions and the consequences for firms' value. (JEL E22, E24, G31, G32, M51)

CONSUMER DEMAND, CONSUMPTION, AND ASSET PRICING: AN INTEGRATED ANALYSIS WITH INTERTEMPORAL TWO-STAGE BUDGETING

2019 ◽  
pp. 1-47
Author(s):  
H. Youn Kim ◽  
Keith R. Mclaren ◽  
K. K. Gary Wong
Keyword(s):  
Asset Pricing ◽  
Durable Goods ◽  
Liquidity Constraints ◽  
Relative Price ◽  
Adjustment Cost ◽  
Integrated Analysis ◽  
Two Stage ◽  
Consumption Growth ◽  
Nondurable Goods ◽  
Demand Functions

This paper integrates seemingly disjoint studies on consumer behavior in micro and macroanalyses via an intertemporal two-stage budgeting procedure with durable goods and liquidity constraints. The model specifies an indirect utility function as a function of nondurable consumption, commodity (nondurables) prices, and durables stock, and derives the demand functions for nondurable goods. A demand function for durable goods is derived in an adjustment cost framework. The consumption growth equation accounts for relative price effects with precautionary saving, durables stock, and liquidity constraints. The stochastic discount factor is approximated by a time-varying linear function of nondurable consumption growth, commodity price growth, durables stock growth, and disposable income growth. The demand functions for six nondurable goods and services are jointly estimated with the Euler equations for bonds, stocks, and durable goods with allowance for liquidity constraints, using US data. Estimation provides new findings for intertemporal consumption and a multifactor consumption-based capital asset pricing model.

scholarly journals A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence

2008 ◽  
Vol 98 (1) ◽  
pp. 474-495 ◽  
Author(s):  
Marjorie Flavin ◽  
Shinobu Nakagawa
Keyword(s):  
Asset Pricing ◽  
Housing Price ◽  
Adjustment Costs ◽  
Portfolio Allocation ◽  
Relative Price ◽  
Adjustment Cost ◽  
Price Risk ◽  
Financial Assets ◽  
Habit Persistence ◽  
Over Time

The paper provides a model of household consumption and portfolio allocation which incorporates housing as both a consumption good and a component of wealth. Household utility depends, possibly nonseparably, on two goods: nondurable consumption, which is costlessly adjustable, and housing, which is subject to a nonconvex adjustment cost. Households face housing price risk in the sense that the relative price of housing varies over time, and can invest in a wide variety of financial assets in addition to housing. This single, reasonably tractable, model generates testable implications for portfolio allocation, risk aversion, asset pricing, and the dynamics of nondurable consumption. (JEL D14, G11, R21)

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