We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on...

We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on...

Using Growth at Risk as a measure of downside growth risk, the authors find that higher perceived levels of downside growth risk seem to be negatively associated with long-term growth. Output collapses and crises are a fact of life. Severe economic downturns occur periodically and have grave...