expenditure share for basic goods declines in total consumption, and the variance of consumption growth rises in the level of consumption. When calibrated to match these two predictions in household consumption data, the model explains portfolio shares that rise in wealth.

cross-section, a strategy that is long on durables and short on services earns a sizable risk premium. In the time series, a strategy that is long on durables and short on the market portfolio earns a countercyclical risk premium. We develop an equilibrium asset-pricing model that explains these...