TY  - JOUR
AU  - Ferson,Wayne E.
AU  - Constantinides,George M.
TI  - Habit Persistence and Durability in Aggregate Consumption: Empirical    Tests
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3631
PY  - 1992
Y2  - March 1992
UR  - http://www.nber.org/papers/w3631
L1  - http://www.nber.org/papers/w3631.pdf
N1  - Author contact info:
Wayne E. Ferson
Department of Finance
and Business Economics
University of Southern California
3670 Trousdale Parkway Suite 308
Los Angeles, CA 90089-0804
Tel: 213/740-5615
Fax: 213/740-6650
E-Mail: ferson@marshall.usc.edu

George M. Constantinides
The University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-7258
Fax: 773/753-8045
 (773) 753-8045
E-Mail: gmc@ChicagoBooth.edu
AB  - Habit persistence in consumption preferences and durability of consumption goods are two hypotheses which imply time-nonseparability in the derived utility for consumption expenditures. We study a simple model with both effects, in which lagged consumption expenditures enter the Euler equation. Habit persistence implies that the coefficients on the lagged expenditures are negative, while durability implies positive coefficients. If both effects are present, then estimating the sign of the coefficients addresses the question as to which of the two effects is dominant. Earlier empirical work on monthly data supported the durability of consumption expenditures. We estimate and test the Euler equation using monthly, quarterly and annual data and find evidence that habit persistence dominates the effect of durability.
ER  -