Land of Addicts? An Empirical Investigation of Habit-Based Asset Pricing Behavior

We acknowledge financial support from the National Science Foundation (Chen), the Alfred P. Sloan Foundation (Ludvigson), and the C.V. Starr Center at NYU. We thank Kenneth French for providing the portfolio return data, and are grateful to John Campbell, David Chapman, John Cochrane, Yuichi Kitamura, Per Krusell, Lars Hansen, Oliver Linton, Anthony Lynch, Monika Piazzesi, Masao Ogaki, B. Ravikumar, Martin Schneider, Jim Stock, George Tauchen, Zhenyu Wang and seminar participants at Carnegie Mellon GSIA, Columbia University, Norwegian School of Economics and Business Administration, Norwegian School of Management, Notre Dame, NYU, University of Chicago, University of Maryland, University of Pennsylvania, 2004 CIREQ-CIRANO Financial Econometrics Conference at Montreal, 2004 NBER Spring Asset Pricing meeting, 2003 NBER Summer Institute, 2004 American Finance Association Meetings, and 2004 Econometric Society winter meetings for useful comments. Jinyong Kim and Artem Voronov provided excellent research assistance. Any errors or omissions are the responsibility of the authors. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research.

• May 19, 2004