High-Order Consumption Moments and Asset Pricing

Andrei Semenov ()
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Andrei Semenov: Department of Economics, York University

Working Papers from York University, Department of Economics

Abstract: This paper develops an approximate equilibrium factor model for asset returns. In this model, the pricing factors are the cross-moments of return with the cross-sectional moments of individual consumption and the signs of the risk factor coefficients are driven by preference assumptions. Using household-level quarterly consumption data from the U.S. Consumer Expenditure Survey, we find that this model explains the observed equity premium with an economically realistic value of risk aversion when the stochastic discount factor is expressed in terms of the cross-sectional skewness and kurtosis, in addition to the mean and variance, of individual consumption.

Keywords: asset pricing; equity premium; Euler equation; heterogeneous consumers; incomplete consumption insurance. (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2003-12, Revised 2005-01
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (1)

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http://econ.yorku.ca/%7Easemenov/wp2003-12-1.pdf Revised version, 2005
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Related works:
Working Paper: High-Order Consumption Moments and Asset Pricing (2010)
Working Paper: High-Order Consumption Moments and Asset Pricing (2004)
Working Paper: High-Order Consumption Moments and Asset Pricing (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:2003_4

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