expenditure share for basic goods declines in total consumption, and the variance of consumption growth rises in the level of consumption. When calibrated to match these two predictions in household consumption data, the model explains portfolio shares that rise in wealth.

The demand for durable goods is more cyclical than that for nondurable goods and services. Consequently, the cash flows and stock returns of durable‐good producers are exposed to higher systematic risk. Using the benchmark input‐output accounts of the National Income and Product Accounts, we...

Economists have traditionally viewed futures prices as fully informative about future economic activity and asset prices. We argue that open interest could be more informative than futures prices in the presence of hedging demand and limited risk absorption capacity in futures markets. We find...

We develop a life-cycle consumption and portfolio choice model in which households have nonhomothetic utility over two types of goods, basic and luxury. We calibrate the model to match the cross-sectional and life-cycle variation in the basic expenditure share in the Consumer Expenditure Survey....

We study the dynamics of how private information is resolved in credit markets and its dependence on systematic uncertainty in collateral value. We develop a model in which all borrowers have verifiable income that can be collateralized, but only good borrowers have additional income that is...