Solving models with external habit
By: Jessica A. Wachter.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11559; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11559.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Habit -- Economic aspects.; Finance -- Mathematical models.
Description: "Habit utility has been the focus of a large and growing body of literature in financial economics.  This study investigates ways of accurately and efficiently solving the Campbell and Cochrane (1999) external habit model.  Solutions for this model based on a grid of values for the state variable are shown to converge as the grid becomes increasingly fine.  Convergence is substantially faster if the price-dividend ratio is computed as a series of 'zero-coupon equity' claims rather than as the fixed-point of the Euler equation.  Fitting the model to the term structure as well as to equity moments (as in Wachter (2005)) also results in faster convergence"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 8/31/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.