Asset Pricing with Garbage

45 Pages Posted: 24 Feb 2009 Last revised: 10 Jan 2014

Alexi Savov

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: April 20, 2010


A new measure of consumption, garbage, is more volatile and more correlated with stocks than the canonical measure, NIPA consumption expenditure. A garbage-based CCAPM matches the U.S. equity premium with relative risk aversion of 17 versus 81 and evades the joint equity premium-risk-free rate puzzle. These results carry through to European data. In a cross section of size, value, and industry portfolios, garbage growth is priced and drives out NIPA expenditure growth.

Keywords: consumption-based asset pricing, equity premium, risk aversion

JEL Classification: E44, G12

Suggested Citation

Savov, Alexi, Asset Pricing with Garbage (April 20, 2010). Journal of Finance, Forthcoming. Available at SSRN:

Alexi Savov (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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