Record Details


Field	Value

Title	Replication data for: By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior

Identifier	https://doi.org/10.7910/DVN/3UHSJR

Creator	John Y. Campbell John Cochrane

Publisher	Harvard Dataverse

Description	We present a consumption-based model that explains a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long-horizon predictability of excess stock returns, and the countercyclical variation of stock market volatility. The model captures much of the history of stock prices from consumption data. It explains the short-and long-run equity premium puzzles despite a low and constant risk-free rate. The results are essentially the same whether we model stocks as a claim to volatile dividends poorly correlated with consumption. The model is driven by an independently and identically distributed consumption growth process and adds a slow- moving external habit to the standard power utility function. These features generate slow countercyclical variations in risk premia. The model posits a fundamentally novel description of risk premia: Investors fear stock primarily because they do poorly in recessions unrelated to the risks of long-run average consumption growth.

Subject	Social Sciences Risk Stock-Prices

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