We develop a new approach to the decomposition of income risk within a nonstationary model of intertemporal choice. The … approach allows for changes in income risk over the life-cycle and with the business cycle. It requires only repeated cross … stochastic simulation of consumption choices in a nonstationarity environment is used to show the robustness of the method for …

transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX … repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life … evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in …

cycle consumption in a general equilibrium overlapping generations model in which markets are otherwise complete. Empirical … studies find that consumption tends to rise early in life, peak around age 45-55, and to decline after that. Our calibrated … model exhibits life cycle consumption that is consistent with this pattern. This follows from the fact that, due to a lack …

We show that a business-cycle component of consumption growth (dubbed business-cycle consumption) with cycles between 2 … and 4 years is effective in explaining the differences in risk premia across alternative test assets, including recently … aggregation of returns and consumption growth over suitable horizons. Consistent with our formalization, we show that the factor …

I study a long-run risk model with non-separable leisure and consumption in the Epstein-Zin preferences to price a … leisure and consumption. While estimating these two long run factors using a vector auto-regression (VAR), I find that growth … (big) stocks - lower average returns - obtain higher long run leisure betas but lower long run consumption betas than value …

The consumption beta theorem of Breeden makes the expected return on any asset a function only of its covariance with … changes in aggregate consumption. It is shown that the theorem is more robust than was indicated by Breeden. The theorem …