Intertemporal Asset Pricing Without Consumption

This paper uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model. In a homoskedastic lognormal setting, with a consumer's objective function that distinguishes the elasticity of intertemporal substitution from the coefficient of relative risk aversion, the consumption-wealth ratio is shown to depend on the former parameter, while asset risk premia are determined by the latter. Risk premia are related to the covariances of asset returns with the market return and with news about the discounted value of all future market returns. 

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