The Cross-Section of Consumer Lending Risk

51 Pages Posted: 16 Aug 2015 Last revised: 22 Oct 2016

See all articles by Chintal A. Desai

Chintal A. Desai

Virginia Commonwealth University (VCU)

Date Written: September 14, 2016


This paper tests the validity of a single-factor (market) model to price consumer lending risk. It classifies US counties into 25 portfolios based on unemployment and nominal income growth. The results, using serious delinquency on revolving credit as default risk, show that the intercepts are indistinguishable from zero in 22 portfolios, and the average default rate of a portfolio increases with its beta. The additional risk factors based on unemployment and income growth portfolios marginally improve the single-factor model. The results are robust to time-varying betas and personal bankruptcy as a measure of consumer lending risk.

Keywords: Household Finance, Consumer credit; Default; Personal Bankruptcy; Empirical Asset pricing

JEL Classification: G12, G21, E51

Suggested Citation

Desai, Chintal, The Cross-Section of Consumer Lending Risk (September 14, 2016). Available at SSRN: or

Chintal Desai (Contact Author)

Virginia Commonwealth University (VCU) ( email )

1015 Floyd Avenue
Richmond, VA 23284
United States

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