THE SPIRIT OF CAPITALISM, NON-EXPECTED UTILITY AND ASSET PRICING |
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| Authors: | Yang Yuuhong |
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| Institution: | 1. Department of Psychiatry and Behavioral Sciences, Johns Hopkins University School of Medicine, Baltimore, Maryland;3. Division of Hematology, Johns Hopkins University School of Medicine, Baltimore, Maryland;2. Johns Hopkins University School of Nursing, Baltimore, Maryland;4. Departments of Anesthesiology, Perioperative, Pain Medicine, and Psychiatry, Harvard Medical School, and Brigham and Women''s Hospital, Pain Management Center, Chestnut Hill, Massachusetts;1. Department of Obstetrics and Gynaecology, University of British Columbia, Vancouver BC;2. Women''s Centre for Pelvic Pain and Endometriosis, Department of Obstetrics and Gynaecology, University of British Columbia, Vancouver BC;1. BC Women''s Centre for Pelvic Pain and Endometriosis, Vancouver, BC, Canada;2. Department of Obstetrics and Gynecology, University of British Columbia, Vancouver, BC, Canada;3. Women''s Health Research Institute, Vancouver, BC, Canada;4. BC Centre for Vulvar Health, Gordon and Leslie Diamond Health Care Centre, Vancouver, BC, Canada;1. Obstetrics and Gynecology Unit, San Raffaele Scientific Institute, Milan, Italy;2. Dipartimento di Scienze Cliniche e di Comunità, Università di Milano, Fondazione IRCCS Ca’ Granda—Ospedale Maggiore Policlinico, Milan, Italy;3. Reproductive Sciences Laboratory, Division of Genetics and Cell Biology, San Raffaele Scientific Institute, Milano, Italy |
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| Abstract: | This paper investigtes testable restrictious on tke thoe-series behavi0r of consumption and asset returns implicd by a representative agent model with the sPirit ofcaptalism in which intertemporal preference is represented by a utility function that generalizes.conventional, time-additive, expected utility. In the recundve structure of preference,the author extalnes the lmplication for cosumptions, portfolio holdings, and stock-marketptices wken investors accumulate wealth not only for the sake of c0nsumption but alsofor wealth-induced social status. When investors care about relative sodal status, thepropensity to consume and risk-taking behavior wh depend on social standards, and stochprices will be volatible. Hence, the spirit of capitaliam seems to be a driving force behind stock-market volatility and economic growth. Because the elasticity of substitutionand the coefficient of relative risk averaiou are independent and the spirit of capitalism isintroduced, the equity prendum puzzle can be partially explained in the model. |
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| Keywords: | the spirit of capitalism non-expected utility asset pricing wealth growth |
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