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Leisure and long-run risks: An empirical evaluation on value premium puzzle

Xiang Zhang

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: I study the ability of a long-run risk model, with nonseparable leisure and consumption, to price the cross-section of U.S. equity returns over the 1948–2015 period. The stochastic discount factor features innovations to future leisure and consumption growth as factors. The model performs well, in terms of a variety of criteria, relative to competing models in explaining the cross-section of the spread in size and value portfolios.

Keywords: Epstein-Zin utility; Long-run risk; Leisure; Vector autoregression (search for similar items in EconPapers)
JEL-codes: G12 G17 N22 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940820301200

DOI: 10.1016/j.najef.2020.101223

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