Asset pricing with a reference level of consumption: New evidence from the cross-section of stock returns

Joachim Grammig () and Andreas Schrimpf

Review of Financial Economics, 2009, vol. 18, issue 3, 113-123

Abstract: This paper presents an empirical evaluation of recently proposed asset pricing models which extend the standard preference specification by a reference level of consumption. We motivate an alternative model that accounts for the return on human capital as a determinant of the reference level. Our analysis is based on a broad cross-section of test assets, which provides a level playing field for a comparison to established benchmark models. The reference level model extended by human capital does a good job in explaining size and value premia. Estimated on Fama and French's size and book-to-market sorted portfolios, it outperforms Lettau and Ludvigson's scaled CCAPM and delivers average pricing errors comparable to the Fama-French three-factor model.

Keywords: Consumption-based; asset; pricing; Cross-section; of; stock; returns; Reference; level (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1058-3300(09)00016-0
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Asset pricing with a reference level of consumption: New evidence from the cross‐section of stock returns (2009)
Working Paper: Asset ppricing with a reference level of consumption: New evidence from the cross-section of stock returns (2009)
Working Paper: Asset Pricing with a Reference Level of Consumption: New Evidence from the Cross-Section of Stock Returns (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:18:y:2009:i:3:p:113-123

Access Statistics for this article

Review of Financial Economics is currently edited by T. K. Mukherjee and G. Whitney

More articles in Review of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().