Consumption with Earnings, Liquidity, and Market Based Models

34 Pages Posted: 23 Apr 2021

See all articles by Robert Snigaroff

Robert Snigaroff

Denali Advisors; Denali Advisors

David Wroblewski

Denali Advisors

Date Written: October 12, 2020


Financial intermediary economic growth theory with its empirical findings, along with stock-level factors; both ideally relate to a consumption asset pricing model. Changing liquidity and earnings combined with the market proxy wealth growth, allowing a recursive consumption model with a low risk aversion coefficient, a risk-free rate close to historical, a high equity premium, and a reasonable elasticity of intertemporal substitution. The empirical consumption model does well against major asset pricing puzzles. Tested over 118 years it is not rejected while a forward-looking consumption model using the market alone as a wealth proxy fails. Changing liquidity and earnings forecast consumption and their ‘crashes’ precede consumption declines. This consistency across approaches adds credence to common risk factors as important risks to investors.

Keywords: CCAPM, Consumption Asset Pricing, Earnings Growth, Liquidity Growth, SDF

JEL Classification: G12

Suggested Citation

Snigaroff, Robert and Wroblewski, David, Consumption with Earnings, Liquidity, and Market Based Models (October 12, 2020). Available at SSRN: or

Robert Snigaroff (Contact Author)

Denali Advisors

United States

Denali Advisors

United States

David Wroblewski

Denali Advisors ( email )

4275 Executive Square
Suite 650
La Jolla, CA 92037
United States

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