Asset Pricing from Daily Shopper Spending
65 Pages Posted: 22 Mar 2021 Last revised: 17 Apr 2023
Date Written: October 4, 2022
We propose a novel consumption measure that has a daily frequency and is derived from real-time shopping data. Our measure solves the joint equity premium and risk-free rate puzzles with a risk aversion coefficient much lower than any other consumption measure. It can explain the cross-sectional variation in expected returns on various portfolios and individual stocks. By decomposing consumption shocks into different frequencies of volatility, our model demonstrates that the lack of short-term dynamics and intra-annual fluctuations in low-frequency consumption measures results in significantly higher levels of risk aversion.
Keywords: Consumption-based Asset Pricing, Consumption Dynamics, Equity Premium
JEL Classification: C12, E21, E44, G12
Suggested Citation: Suggested Citation