LAUSR

Abstract Consumption capital asset pricing models (CCAPMs) have been the center of interest in the vast macrofinance literature. We suggest using fresh long-run durable expenditure growth data to study CCAPM and demonstrate that the durable expenditure risk in the long-run can explain the cross-sectional return of the U.S. stock market. Using durable expenditures measured over the long-run, we can obtain a reasonable risk-aversion parameter and estimate a smaller value than that obtained by many recently proposed novel models. Regarding multiple-period returns, durable expenditure growth over 14 quarters has an explanatory power of 70% and a risk aversion of 14.