asset pricing with stochastic habit formation资产定价与随机形成习惯.pdfVIP

Journal of Mathematical Finance, 2012, 2, 175-180 /10.4236/jmf.2012.22018 Published Online May 2012 (http://www.SciRP.org/journal/jmf) Asset Pricing with Stochastic Habit Formation Masao Nakagawa The Institute of Economic Research, Kyoto University, Kyoto, Japan Email: m-nakagawa@kier.kyoto-u.ac.jp Received January 23, 2012; revised March 7, 2012; accepted March 18, 2012 ABSTRACT This paper examines optimal consumption/portfolio choices under stochastic habit formation in which it is uncertain how deep consumers would become in the habit of consuming in future. By extending Shroder and Skiadas [1] to sto- chastic habit formation, the optimization problem with stochastic habit forming preferences is transformed into that with simple time-additive preferences. Optimal portfolios are composed of the tangency portfolio and habit hedging portfolio. Resulting risk premia are characterized by consumption beta, which is proportionate to the covariance with consumption changes, and habit beta, defined by using the covariance with habit. Keywords: Asset Pricing; Stochastic Habit Formation 1. Introduction As my main conclusions, it is shown that 1) by ex- Habit formation has been reported in the literature to play tending [1], the optimization problem with stochastic important roles in individual consumers’ intertemporal habit forming preferences can be transformed into that decisions and macroeconomic phenomena [2,3]. One of with simple time-additive preferences; that 2) consum- the seminal papers by S