Non-substitutable consumption growth risk

Robert F. Dittmar, Christian Schlag and Julian Thimme

No 408, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Standard applications of the consumption-based asset pricing model assume that goods and services within the nondurable consumption bundle are substitutes. We estimate substitution elasticities between different consumption bundles and show that households cannot substitute energy consumption by consumption of other nondurables. As a consequence, energy consumption affects the pricing function as a separate factor. Variation in energy consumption betas explains a large part of the premia related to value, investment, and operating profitability. For example, value stocks are typically more energy-intensive than growth stocks and thus riskier, since they suffer more from the oil supply shocks that also affect households.

Keywords: Asset pricing; consumption; cross-section of stock returns (search for similar items in EconPapers)
JEL-codes: D81 E44 G12 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ene and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/280967/1/1877119253.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:280967

DOI: 10.2139/ssrn.3289249

Access Statistics for this paper

More papers in SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().