Intertemporal asset pricing without risk-free security, zero-beta portfolio and consumption data

In this note, we propose an intertemporal asset pricing approach without risk-free security, zero-beta portfolio and consumption data. The framework is based on the consumption model, logarithmic utility function, and relative returns. Our main result indicates that the expected return of an asset is equal to the return of the market portfolio (the benchmark), plus a positive or negative risk adjustment, directly proportional to its relative-beta (obtained from the difference between the usual market beta and one). This offers an additional and easy-to-apply tool to estimate the required return of an asset and characterize the equilibrium risk-return relationship.