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… Click to show full abstract
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.
               
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