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...

A new bias-corrected estimator is developed to test for habit formation. The estimator is applicable to any dynamic panel model with fixed and spatial effects as well as endogenous control variables. The estimator is asymptotically unbiased and normally distributed. Moreover, simulation results...