Long-Run Stockholder Consumption Risk and Asset Returns





    Search for more papers by this author
    • Christopher J. Malloy is at Harvard Business School, Tobias J. Moskowitz is at University of Chicago Booth School of Business and NBER, and Annette Vissing-Jørgensen is at Northwestern University and NBER. We are grateful to David Chapman; John Cochrane; Lauren Cohen; Joshua Coval; Eugene Fama; Francisco Gomes; Lars Hansen; John Heaton; Ravi Jagannathan; Arvind Krishnamurthy; Sydney Ludvigson; Jonathan Parker; Monika Piazzesi; Jacob Sagi; Amir Yaron; Moto Yogo; and seminar participants at the Northwestern Finance lunch; the Board of Governors of the Federal Reserve; the University of Chicago; HBS; LSE; LBS; INSEAD; Copenhagen Business School; Norwegian School of Management; Norwegian School of Economics and Business Administration; University of Amsterdam; University of Copenhagen (CAM); the SED meetings in Budapest, Hungary; the WFA meetings in Portland, OR; and the NBER Summer Institute Asset Pricing meetings for helpful comments and suggestions. We also thank Ken French for providing data. Moskowitz thanks the Center for Research in Security Prices, the Initiative on Global Markets at the University of Chicago, and the Neubauer Family Faculty Fellowship for financial support.


We provide new evidence on the success of long-run risks in asset pricing by focusing on the risks borne by stockholders. Exploiting microlevel household consumption data, we show that long-run stockholder consumption risk better captures cross-sectional variation in average asset returns than aggregate or nonstockholder consumption risk, and implies more plausible risk aversion estimates. We find that risk aversion around 10 can match observed risk premia for the wealthiest stockholders across sets of test assets that include the 25 Fama and French portfolios, the market portfolio, bond portfolios, and the entire cross-section of stocks.