The Double Power Law in Consumption and Implications for Testing Euler Equations
研究发现美国消费及其增长率的截面分布上下尾均服从幂律，指数约4，导致高阶矩可能不存在，使基于截面矩的广义矩估计欧拉方程不一致，并可能虚假支持异质性代理人资产定价模型。
We provide evidence suggesting that the cross-sectional distributions of US consumption and its growth rate obey the power law in both the upper and lower tails, with exponents approximately equal to four. Consequently, high-order moments are unlikely to exist, and the generalized method of moments estimation of Euler equations that employs cross-sectional moments may be inconsistent. Through bootstrap studies, we find that the power law appears to generate spurious nonrejection of heterogeneous-agent asset pricing models in explaining the equity premium. Dividing households into age groups, we propose an estimation approach that appears less susceptible to fat tail issues.