New asset pricing model revolutionizes investment opportunities and consumption predictions.
The article presents a model for pricing assets based on uncertain consumption-goods prices and investment opportunities. It introduces a single-beta asset pricing model in a continuous-time framework, where asset betas are measured relative to changes in the aggregate real consumption rate. The model shows that in an optimal scenario, changes in individuals' consumption rates are perfectly correlated. The research suggests that asset prices are influenced by both investment decisions and consumption patterns.