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...

For the purpose of stock return prediction, we propose LASSO methods augmented by further penalties related to differences in coefficient estimates at t and t+1. The economic motivation is that the coefficient for a characteristic should not change too much from t to t+1, i.e., the market's...

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...

In a parsimonious regime switching model, we find strong evidence that expected consumption growth varies over time. Adding inflation as a second variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected inflation. Embedded in a...

This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it...

In a parsimonious regime switching model, we find strong evidence that expected consumption growth varies over time. Adding inflation as a second variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected inflation. Embedded in a...