Jacobs, Kris; Wang, Kevin Q. - Centre Interuniversitaire de Recherche en Analyse des … - 2002
This paper investigates the importance of idiosyncratic consumption risk for the cross-sectional variation in average … returns on stocks and bonds. If idiosyncratic consumption risk is not priced, the only pricing factor in a multiperiod economy … also a priced factor. This demonstrates that consumers are not fully insured against idiosyncratic consumption risk, and …