Intertemporal utility models for asset pricing: Reference levels and individual heterogeneity

The dissertation proposes new consumption-based asset-pricing models. These models, either with a representative agent or with heterogeneous consumers, explain the equity risk premium and the risk-free rate with economically plausible values of the preference parameters. In addition, these models nest, as particular cases, the most well-known models in the literature, allowing for informative specification tests.

The first article introduces a new specification of preferences with a reference level in the representative-agent framework. The second article suggests that the disentangling risk aversion and intertemporal substitution may be obtained not by replacing, as the recursive utility does, the future consumption stream by a certainty equivalent of future utility but by an exogenous reference level which, in a recursive way, assesses the expected future consumption. In the third article, a model with heterogeneous consumers underlines the importance of asymmetry of the cross-sectional distribution of individual consumption in characterizing risk premia. The fourth article studies the importance of consumer heterogeneity when agents have a utility function with a reference level and tests the standard power utility model in the economy with heterogeneous consumers. (Abstract shortened by UMI.)