Consumption Volatility Risk

Oliver Boguth and Lars‐alexander Kuehn

Journal of Finance, 2013, vol. 68, issue 6, 2589-2615

Abstract: We show that time variation in macroeconomic uncertainty affects asset prices. Consumption volatility is a negatively priced source of risk for a wide variety of test portfolios. At the firm level, exposure to consumption volatility risk predicts future returns, generating a spread across quintile portfolios in excess of 7% annually. This premium is explained by cross‐sectional differences in the sensitivity of dividend volatility to consumption volatility. Stocks with volatile cash flows in uncertain aggregate times require higher expected returns.

Date: 2013
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https://doi.org/10.1111/jofi.12058

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:68:y:2013:i:6:p:2589-2615

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