Asset Pricing from Daily Shopper Spending
53 Pages Posted: 22 Mar 2021 Last revised: 8 Jul 2021
Date Written: May 1, 2021
We propose a novel consumption measure that has a daily frequency and is based on real-time shopping data. Our measure explains the joint equity-premium–risk-free-rate puzzle with a risk aversion coefficient much lower than any other consumption measures. It encompasses other consumption measures in explaining the cross-sectional variation of expected returns on various portfolio and is the only consumption measure that passes Kleibergen and Zhan (Journal of Finance, 2020) robust tests. Our model decomposes consumption shocks into different frequency of volatility and shows that ignoring short-term dynamics and intra-annual fluctuations explains the much higher risk aversion from low-frequency consumption measures.
Keywords: Consumption-based Asset Pricing, Consumption Dynamics, Equity Premium
JEL Classification: C12, E21, E44, G12
Suggested Citation: Suggested Citation