Using a macro quantile factor model, we examine cross-state (i.e., cross-quantile) heterogeneity in consumption behaviors. We find that common macro factors generate a “big bang/crunch” effect on micro consumption. Generally speaking, when the aggregate effect of the common factors on the...

This paper shows that consumption-based asset pricing puzzles arise from using globally concave-shaped consumption utility. We empirically find that asset returns correlate negatively with many individuals' low-quantile consumption growth. This finding challenges most mainstream models and...

We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions...

This paper challenges the view that alternative consumption measures (garbage, fourth quarter, unfiltered consumption) can address the shortcomings of consumption-based asset pricing. When the CRRA model is confronted with the cross-section of asset returns and the risk-free rate volatility, the...

We propose a single-factor asset pricing model based on an indicator function of consumption growth being less than its endogenous certainty equivalent. This certainty equivalent is derived from generalized disappointment aversion preferences, and it is located approximately one standard...

We identify the S-Shaped consumption utility by reconciling consumption decisions with asset returns. Different from the concave-shaped utility, the S-shaped consumption utility predicts a possible negative correlation between low quantiles of consumption growth and asset returns, for which we...

Utilizing the asset pricing framework, we justify S-shaped consumption utility functions by reconciling realized consumption with asset returns. The S-shaped consumption utility predicts a possible negative correlation between asset returns and lower quantiles of consumption growth, for which we...

We estimate the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. We consider two different models under which those shocks may affect consumption. In the first one, housing is a risky asset. In the second one, housing has a role as a...

Overconfidence is a widely documented phenomenon. Empirical evidence reveal two types of overconfidence in financial markets: investors both overestimate the average rate of return to their assets and underestimate uncertainty associated with the return. This paper explores implications of...

In this paper household level data are used to explore whether unemployment risk is an important factor in the timing of consumers' durable goods purchase decisions. A theoretical model is presented in which both income uncertainty and household debt play a direct role, offering a potential...