Consumption Volatility and the Cross-Section of Stock Returns

Roméo Tédongap

Review of Finance, 2015, vol. 19, issue 1, 367-405

Abstract: I derive and test multi-horizon implications of a consumption-based equilibrium model featuring fluctuating expected growth and volatility. My setup allows consumption dynamics to be estimated jointly with covariance risk prices in a single-stage generalized method of moment, and then inferences from asset pricing tests reflect uncertainty coming from factor estimation. I show that changes in consumption volatility are the key driver for explaining major asset pricing anomalies across risk horizons, while other factors play no or a secondary role. Value stocks and past long-term losers pay higher average returns mainly because they covary more negatively with these changes than what other stocks do.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rft058 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
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:oup:revfin:v:19:y:2015:i:1:p:367-405.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().