This paper proposes an estimable asset pricing model that builds upon micro consumption andreference-dependent preference. Central to the model is an S-shaped consumption utility function that is convex below the reference point. The model quantitatively accounts for both low risk-free rates and...

Using a macro quantile factor model, we examine cross-state (i.e., cross-quantile) heterogeneity in consumption behaviors. We find that common macro factors generate a “big bang/crunch” effect on micro consumption. Generally speaking, when the aggregate effect of the common factors on the...

This paper shows that consumption-based asset pricing puzzles arise from using globally concave-shaped consumption utility. We empirically find that asset returns correlate negatively with many individuals' low-quantile consumption growth. This finding challenges most mainstream models and...

This paper investigates consumption-behavior heterogeneity across consumption growth levels by analyzing microdata from a unique macro perspective. This innovative approach allows us to test the applicability of Kahneman and Tversky's (1979) S-shaped utility to consumption behaviors with a...

We identify the S-Shaped consumption utility by reconciling consumption decisions with asset returns. Different from the concave-shaped utility, the S-shaped consumption utility predicts a possible negative correlation between low quantiles of consumption growth and asset returns, for which we...