Abstract
<p>Intertemporal asset pricing models typically begin with the market factor and introduce additional state variables to capture changes in investment opportunities over time. Empirically, these state variables have traditionally been proxied by macroeconomic variables because they reflect broad shifts in economic conditions affecting the aggregate opportunity set. These proxies are useful at the aggregate level, but less suited to representing variation in investment opportunities across individual assets. This study therefore develops a micro-level approach that replaces macroeconomic proxies with asset-specific variables. The central idea is that a broad set of such variables can more fully represent individual, time-varying investment opportunities.</p>