Asset pricing with data revisions

Daniel Borup and Erik Christian Schütte

Journal of Financial Markets, 2022, vol. 59, issue PB

Abstract: We document two important asset pricing implications of the data release process of US consumption growth. First, initial releases are more suitable for asset pricing than final revised releases. This is because most revisions smooth out essential short-term consumption growth fluctuations. Second, first revisions incorporate novel information and their magnitude is strongly linked to consumption growth ambiguity. We formulate a novel consumption-based model, the Revised CCAPM, which incorporates these two effects using vintage data. It explains a striking 75% of the cross-sectional variation in average returns on 25 size-value portfolios. These results support the concept of state-dependent ambiguity attitudes.

Keywords: Data revisions; Vintage data; Consumption-based capital asset pricing model; NIPA personal consumption expenditures; Ambiguity (search for similar items in EconPapers)
JEL-codes: C82 E21 G11 G12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:59:y:2022:i:pb:s1386418121000021

DOI: 10.1016/j.finmar.2021.100620

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