University College London
Department of Economics
NBER Working Papers and Publications
|September 1990||On The Behavior of Commodity Prices|
with Angus Deaton: w3439
The classical theory of commodity price determination integrates myopic supply and demand on the one hand with competitive storage (speculation) under rational expectations on the other. Taking into account the fact that inventories mist; be non-negative, this paper derives from the theory testable implications on the behavior of prices, and makes a first attempt to confront these implications with the empirical evidence. The nonlinearities turn out to be a crucial ingredient in matching the stylized facts, particularity the asymmetries and the sharp upward flares that characterize many commodity prices. The model, simple as it is, goes a long way in reproducing the main features of the data for a range of commodities.
Published: Review of Economic Studies, vol. 59, pp. 1-23 (1992) citation courtesy of
|August 1987||Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods|
with Sanford J. Grossman: w2369
We analyze a model of optimal consumption and portfolio selection in which consumption services are generated by holding a durable good. The durable good is illiquid in that a transaction cost must be paid when the good is sold. It is shown that optimal consumption is not a smooth function of wealth; it is optimal for the consumer to wait until a large change in wealth occurs before adjusting his consumption. As a consequence, the consumption based capital asset pricing model fails to hold. Nevertheless, it is shown that the standard, one factor, market portfolio based capital asset pricing model does hold in this environment. It is shown that the optimal durable level is characterized by three numbers (not random variables), say x, y, and z (where x < y < z). The consumer views the ratio ...
Published: Econometrica, vol. 58, no. 1, January 1990, pp. 25-51. citation courtesy of