Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (10)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Black, F.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Rev Fin 1990; 3:107-114
© 1990 the Society for Financial Studies

Article

Mean reversion and consumption smoothing

F Black
Goldman Sachs Asset Management, 32 Old Slip, 34th Floor, New York, NY 10004, USA

Abstract

Most models of the evolution of wealth and consumption assume that wealth volatility and risk premium are constant. But in fact, volatility decliners, and risk premium seems to decline, as wealth rises. A model that allows mean reversion in the sense that the risk premium declines as wealth rises can help explain both the 'consumption smoothing puzzle' and the 'equity premium puzzle'. In an example of such a model that gives us an analytic solution, direct and derived risk aversion are both constant, but differ.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 South Asia Economic JournalHome page
M. Chakraborty
Market Efficiency for the Pakistan Stock Market: Evidence from the Karachi Stock Exchange
South Asia Economic Journal, March 1, 2006; 7(1): 67 - 81.
[PDF]


Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.