John has a fun survey piece up now called Macro Finance where he reviews and evaluates several contending theories for cleaning up problems in the basic Consumption CAPM framework.
The theories are:
- Habits (Campbell and Cochrane1999a,1999b).
- Recursive utility (Epstein and Zin1989).
- Long run risks (BansalandYaron2004;Bansal,Kiku,andYaron2012).
- Idiosyncratic risk (ConstantinidesandDuffie1996).
- Heterogeneous preferences (Gaˆrleanu and Panageas 2015).
- Rare Disasters (Reitz1988;Barro2006).
- Utility nonseparable across goods(Piazzesi,Schneider,andTuzel2007).
- Leverage; balance sheet; “institutional finance” (Brunnermeier 2009, Krishnamurthy and He 2013, many others).
- Ambiguity aversion, min-max preferences,(HansenandSargent2001).
- Behavioral finance; probability mistakes(Shiller1981,2014).
I will use this in my PhD macro class this fall as a nice extension to the asset pricing stuff in Romer’s text. Thanks, JC!