Research On Asset Pricing Theory Based On Habit Formation In Production Econom

Starting from the consumer’s habit formation characteristic,this dissertation es-tablishes strict mathematical financial models and uses the dynamic stochastic optimal control method to analyze the time-inconsistency preference in behavioral finance,and investment frictions in the firm’s investment policy,the jump risk,as well as the macroe-conomic cycle.The combination of those factors will affect consumption decisions,corporate investment decisions,and asset pricing variables including the risk-free rate,the risk premium,and the corporate value.The contributions of the dissertation are summed up as follows:（1）This dissertation puts habit formation into the production economy and com-pares the variables with that of the endowment economy.The results show that the optimal consumption increases with the increase of the habit level,while the optimal investment decreases with the increase of the habit level.Therefore,the existence of habit formation makes consumption crowd out investment.In addition,the risk-free rate of the endowment economy increases with the growth of the habit level,but the risk-free rate of the production economy decreases with the growth of the habit level.Risk premium increases with the increase of the habit level in both economies.（2）This dissertation explores the effect of the investment friction on the gen-eral equilibrium habit formation model under the production economy.Different from Campbell and Cochrane（1999）^[66]focusing on the endowment economy to match the consumption data of the real world,this dissertation focus on the production economy to match the investment data of the real world.The results show that the stationary distribution of the investment-output ratio generated by the model fits the data remark-ably well.The data moments of the real world and the model are quite close,and we can even obtain a fair approximation of the curves comparing the real data distribution figure with the model-simulating distribution figure,which provides a more suitable theoretical model for the distribution feature of investment-output ratio.In addition,the average interest rate and risk premium generated by the model also fit the data well,en-riching the theoretical support for solving the”risk premium puzzle”.In addition to the comparison of the model simulations and the real data,the role of investment friction in the production economy with habit formation is also studied.Investment friction leads to a more aggressive consumption strategy but a more conservative investment choice.This effect on risk-free rate,however,is heterogeneous.When habit-capital ratio is low,the risk-free rate of the low-level investment friction is higher,while it is lower when habit-capital ratio is high.Moreover,the investment friction induces higher value of capital,i.e.Tobins’s.In addition,the impacts of productivity level,habit persistency,risk aversion and volatility on optimal policy variables and asset pricing variables are also studied.Productivity leads to a more aggressive consumption strategy,as well as the investment choice.Moreover,productivity induces higher value of risk-free rate,as well as risk premium.What is more,productivity induces the higher capital price.Habit persistency leads to a more aggressive consumption strategy but the more conser-vative investment choice.Moreover,habit persistency induces lower level of risk-free rate,but higher level of risk premium.What is more,habit persistency also leads to a lower level of capital price.The effects of risk averse on optimal strategy,risk-free rate,risk premium and Tobin’sare heterogeneous with different states of habit level.When habit level is low,risk averse induces lower level of consumption and interest rate,while higher level when habit level is high.When habit level is low,risk averse induces higher level of risk premium and Tobin’s,while lower level when habit level is high.The volatility effect induces lower level of consumption and interest rate,while induces higher level of risk premium,as well as Tobin’s,but the effects of volatility on interest rate and risk premium are complicated.（3）Based on habit formation,this dissertation studies the impact of jump risk on decision variables and price variables.The results show that the economy with the pos-itive jump risk is more active in consumption than the economy without jump risk as well as the economy with the recession jump,but the investment is more conservative.At the same time,compared with the other two kinds of economy,the risk-free rate becomes steeper,the risk premium becomes higher,and Tobin’sis lower.The com-parative static analysis of jump intensity is also analyzed in this dissertation.It is found that with the increase of jump intensity,the consumption becomes more active,but the investment becomes more conservative.When the jump intensity changes,the change of the risk-free rate depends on the habit level.When the habit level is low,the risk-free rate increases with the increase of the jump intensity;in contrast,when the habit level is high,the risk-free rate decreases with the increase of the jump intensity.When the jump intensity becomes higher,the greater the risk premium,but the smaller Tobin’sbecomes.（4）In this dissertation,the factor of inconsistent time preference is added to the general equilibrium model of the production economy based on habit formation.The results show that consumers with the time-inconsistent preferences will spend more actively,but invest more conservatively.Under the influence of habit formation,con-sumers tend to consume more actively and invest more conservatively when their habit level becomes larger.The two factors have mutually reinforcing effects,causing con-sumers to consume more and invest less.In terms of asset pricing,economies with time-inconsistent preferences have lower risk-free rate,higher risk premium,and lower Tobin’s.（5）This dissertation comprehensively examines the habit formation factor and the business cycle factor.The results show that the consumption strategy and the investment strategy of a good-state economy are more active than those of a bad economy.At the same time,as habit level continues to rise,consumption and investment response differ-ently.Consumption has become more active,but investment has become more conser-vative.In terms of various variables of asset pricing,the risk premium and Tobin’sof a good state are both higher than those of a bad state.This reflects that investment activ-ities have become more active in a good state.In addition,the results also show that the properties of the risk-free rate in both good and bad economies are distinct according to different levels of risk aversion.When the level of risk aversion is low,the risk-free rate of a good state is lower at every habit level;but when the level of risk aversion is high,the size of the risk-free rate of a good or bad state depends on the habit level.When the level of habit is low,the risk-free rate of a good state is low,just as that of an economy with a low degree of risk aversion;but when the level of habit is high,the risk-free rate of a good state is higher.