TY  - JOUR
AU  - Dunn,Kenneth B.
AU  - Singleton,Kenneth J.
TI  - Modeling the Term Structure of Interest Rates Under Nonseparable Utilityand Duriability of Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1415
PY  - 1984
Y2  - August 1984
UR  - http://www.nber.org/papers/w1415
L1  - http://www.nber.org/papers/w1415.pdf
N1  - Author contact info:
Kenneth J. Singleton
Graduate School of Business
Knight Management Center
Stanford University
Stanford, CA 94305
Tel: 650/723-5753
Fax: 650/725-6152
E-Mail: kenneths@stanford.edu
AB  - This paper investigates the term structure relations implied by a two-good model in which goods are durable and the preference function of consimters may be non separable both over time and the decision variables. The parameters characterizing preferences are estimated and the implied restrictions on the comovements of consumptions and the returns from following different investment strategies in bonds are examined. Both the durability of goods (modeled by a linear service technology) and the nonseparability of preferences over services from goods are important factors in explaining the time paths of individual returns. However, substantial evidence against our model is obtained when the restrictions associated with two different investment strategies are studied simultaneously. Specifically, the difference between the sample mean returns are too large relative to the difference between the sample covariances of the returns and the marginal utility from acquiring a unit of the numeraire good. Our findings suggest that these discrepancies are not a consequence of either the relatively small variability in aggregate acquisitions of goods, or our small estimates of relative risk aversion.
ER  -