Macro Finance, Cochrane style!

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:

  1. Habits (Campbell and Cochrane1999a,1999b).
  2. Recursive utility (Epstein and Zin1989).
  3. Long run risks (BansalandYaron2004;Bansal,Kiku,andYaron2012).
  4. Idiosyncratic risk (ConstantinidesandDuffie1996).
  5. Heterogeneous preferences (Gaˆrleanu and Panageas 2015).
  6. Rare Disasters (Reitz1988;Barro2006).
  7. Utility nonseparable across goods(Piazzesi,Schneider,andTuzel2007).
  8. Leverage; balance sheet; “institutional finance” (Brunnermeier 2009, Krishnamurthy and He 2013, many others).
  9. Ambiguity aversion, min-max preferences,(HansenandSargent2001).
  10. 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!


habit move




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