We show that a business-cycle component of consumption growth (dubbed business-cycle consumption) with cycles between 2 … aggregation of returns and consumption growth over suitable horizons. Consistent with our formalization, we show that the factor … loadings associated with consumption growth aggregated over a 2-year horizon have similar pricing ability as those associated …

This paper introduces a novel consumption-based variable, cyclical consumption, and examines its predictive properties … for stock returns. Future expected stock returns are high (low) when aggregate consumption falls (rises) relative to its … trend and marginal utility from current consumption is high (low). We show that the empirical evidence ties consumption …

consumer preferences and instead uses asset prices. The method is based on the marginal cost of consumption fluctuations, the … per unit benefit of a marginal reduction in consumption fluctuations expressed as a percentage of consumption. We show … that this measure is an upper bound for the benefit of reducing all consumption fluctuations. We also clarify the link …