Chinese investors´ selections of consuming and investing under bounded rationality

Inter-temporal utility maximization is a kind of paradigms in economic and financial research. Assets pricing theory have made a breakthrough under the hypothesis of complete rationality. However, this kind of theory can´t interpret economical phenomena perfectly such as the “puzzle of equity risk premium” and “consumption — smoothing puzzle”. In this paper, with the concept that consumption and wealth are substitutable, a new kind of utility function is raised to interpret the relationship of consumption, investment and return on assets. Empirical test is used to prove out its validity in economical phenomena interpreting.