Analytic solving of asset pricing models: The by force of habit case

Abel, 1990, Asset prices under habit formation and catching up with the jones, American Economic Review, 80, 38 Ahlfors, 1979 Barro, 2006, Rare disasters and asset markets in the twentieth century, Quarterly Journal of Economics, 121, 823, 10.1162/qjec.121.3.823 Blume, 1982, Characterization of optimal plans for stochastic dynamic programs, Journal of Economic Theory, 28, 221, 10.1016/0022-0531(82)90059-X Brock, 1972, Optimal economic growth and uncertainty: the discounted case, Journal of Economic Theory, 4, 479, 10.1016/0022-0531(72)90135-4 Calin, 2005, Solving asset pricing models when the price–dividend function is analytic, Econometrica, 73, 961, 10.1111/j.1468-0262.2005.00600.x Campbell, 1999, By force of habit, a consumption-based explanation of aggregate stock market behavior, Journal of Political Economy, 107, 205, 10.1086/250059 Cecchetti, 2000, Asset prices with distorted beliefs: are equity returns too good to be true?, American Economic Review, 90, 787, 10.1257/aer.90.4.787 Chen, X., Ludvigson, S.C., 2008. Land of addicts? an empirical investigation of habit-based asset pricing models. Working paper, New York University. Chen, Y, Cosimano, T.F., Himonas, A.A., 2008. Solving an asset pricing model with hybrid internal and external habits, and autocorrelated gaussian shocks. Annals of Finance, 4, 305–344. Choi, H., Mark, N.C., Sul, D., 2008. Endogenous discounting, the world savings glut and the U.S. current account. Forthcoming Journal of International Economics, forthcoming. Conway, 1973 Engel, 2005, Exchange rates and fundamentals, Journal of Political Economy, 113, 485, 10.1086/429137 Epstein, L.G., Zin, S.E., 1989. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: a theoretical framework. Econometrica 57, 937–969. Epstein, 1990, First-order risk aversion and the equity premium puzzle, Journal of Monetary Economics, 26, 387, 10.1016/0304-3932(90)90004-N Epstein, 1991, Substitution, risk aversion, and the temporal behavior of consumption and asset returns: an empirical analysis, Journal of Political Economy, 99, 263, 10.1086/261750 Geweke, 2001, A note on some limitations of CRRA utility, Economic Letters, 71, 341, 10.1016/S0165-1765(01)00391-3 Hörmander, 1979 Hörmander, 1983 Jin, H., Judd, K.L., 2002. Perturbation methods for general dynamic stochastic models. Working paper, Stanford University. Judd, 1992, Projection methods for solving aggregate growth models, Journal of Economic Theory, 58, 410, 10.1016/0022-0531(92)90061-L Judd, K.L., 1996. Approximation, perturbation, and projection methods in economic analysis. In: Amman, H.M., Kendrick, D.A., Rust, J. (Eds.), Handbook of Computational Economics. Elsevier, Amsterdam. Judd, 1998 Korniotis, G.M., 2005. Does external habit explain expected returns when markets are incomplete?. Review of Financial Studies, forthcoming. Mehra, 1985, The equity premium: a puzzle, Journal of Monetary Economics, 15, 145, 10.1016/0304-3932(85)90061-3 Mehra, 2003, The equity premium in retrospect, 10.1016/S1574-0102(03)01023-9 Samuelson, 1970, The fundamental approximation theorem of portfolio analysis in terms of means, variance, and higher moments, Review of Economic Studies, 37, 537, 10.2307/2296483 Santos, 1991, Smoothness of the policy function in discrete time economic models, Econometrica, 59, 1365, 10.2307/2938371 Santos, 1992, Differentiability and comparative analysis in discrete time infinite horizon optimization, Journal of Economic Theory, 57, 222, 10.1016/S0022-0531(05)80049-3 Santos, 1993, On high-order differentiability of the policy function, Economic Theory, 3, 565, 10.1007/BF01209702 Santos, M.S., 1999. Numerical solution of dynamic economic models. In: Taylor, J.B., Woodford, M. (Eds.), Handbook of Macroeconomics. Elsevier, Amsterdam. Santos, 2000, Accuracy of numerical solutions using the euler equation residuals, Econometrica, 68, 1377, 10.1111/1468-0262.00165 Shiller, 1989 Tauchen, 1991, Quadrature-based methods for obtaining approximate solutions to the integral equations of nonlinear rational expectations models, Econometrica, 59, 371, 10.2307/2938261 Wachter, J.A., 2002. Habit formation and returns on bonds and stocks. Working paper, New York University. Wachter, 2005, Solving models with external habits, Financial Research Letters, 2, 210, 10.1016/j.frl.2005.08.001 Wachter, 2006, A consumption model of the term structure of interest rates, Journal of Financial Economics, 79, 365, 10.1016/j.jfineco.2005.02.004 Weil, 1989, The equity premium puzzle and the risk-free rate puzzle, Journal of Monetary Economics, 24, 401, 10.1016/0304-3932(89)90028-7