Measuring Consumption Risk When Investors May Make Infrequent Decisions: Evidence from Japan

摘要

Using Japanese data we find that cross sectional differences in exposure to consumption risk, i.e., the risk that economy wide events may unfavorably affect consumption choices, explains the cross section of average returns on stocks, provided we allow for the possibility that investors may review their consumption plans and portfolio choices at infrequent intervals when measuring a stock's consumption risk exposure. The consumption risk premium we find using Japanese data is about the same that Jagannathan and Wang (2007) find using U.S. data.