Abstract
The term structure relations implied by a model in which preferences are non-separable functions of the service flows from two goods are investigated. The parameters characterizing preferences are estimated and restrictions on the co-movements of consumptions and Treasury bill returns are examined. Both the durability of goods and the non-separability of preferences are important factors in explaining the time paths of individual returns, but there is substantial evidence against the cross-sectional restrictions implied by our model. Differences between sample mean returns are too large relative to the sample covariances of the return differences and the marginal utility of consumption.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.