Seasonality and Consumption-Based Asset Pricing




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    • Ferson is from the Graduate School of Business at the University of Chicago, Chicago IL 60637. Harvey is from the Fuqua School of Business at Duke University, Durham NC 27706. We thank Sandra Betton, George Constantinides, Kenneth French, Joel Hasbrouck, Lars Hansen, Ravi Jagannathan, Allan Kleidon, Peter Rossi, Kenneth Singleton, René Stulz (the editor), Robert Vishny, John Long, an anonymous referee, and seminar participants at Carnegie Mellon University, the University of Chicago, Duke University and the American Finance Association for helpful discussions and comments. The first author acknowledges financial support from the Center for Research in Security Prices at the University of Chicago.


Most of the evidence on consumption-based asset pricing is based on seasonally adjusted consumption data. The consumption-based models have not worked well for explaining asset returns, but with seasonally adjusted data there are reasons to expect spurious rejections of the models. This paper examines asset pricing models using not seasonally adjusted aggregate consumption data. We find evidence against models with time-separable preferences, even when the models incorporate seasonality and allow seasonal heteroskedasticity. A model that uses not seasonally adjusted consumption data and nonseparable preferences with seasonal effects works better according to several criteria. The parameter estimates imply a form of seasonal habit persistence in aggregate consumption expenditures.