Leading production-based asset pricing models predict that the sources of fluctuations in real investment and (scaled) stock prices are the same. Yet, extant empirical findings point to a large difference in these sources. We revisit this empirical question by deriving a present-value relation...

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...