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Revision with unchanged content. This book consists of three essays on the relationship between consumption, the business cycle, and expected returns on financial assets. The first essay is "A Consumption-Based Explanation of Expected Stock Returns". A revised version of the essay was published in The Journal of Finance 61:2 (April 2006), pp. 539-580. The second essay is "Estimating the Elasticity of Intertemporal Substitution When Instruments Are Weak". The essay was published in The Review of Economics and Statistics 86:3 (August 2004), pp. 797-810. The third essay is "Efficient Tests of Stock Return Predictability", coauthored by John Y. Campbell. A revised version of the essay was published in the Journal of Financial Economics 81:1 (July 2006), pp. 27-60. The thesis was awarded the 2005 Zellner Thesis Award in Business and Economic Statistics by the American Statistical Association.

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Motohiro Yogo is an Assistant Professor of Finance at the Wharton School of the University of Pennsylvania and a Faculty Research Fellow of the National Bureau of Economic Research. He received a Ph.D. in economics from Harvard University in 2004 and an A.B. in economics from Princeton University in 2000.

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