Cyclical Asset Returns in the Consumption and Investment Goods Sector

Burkhard Heer, Alfred Maussner () and Bernd Suessmuth
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Bernd Suessmuth: Universitat Leipzig
Authors registered in the RePEc Author Service: Bernd Süssmuth

Review of Economic Dynamics, 2018, vol. 28, 51-70

Abstract: We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the U.S. economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a two-sector real business cycle model with habit formation, sector-specific growth and adjustment costs of capital. The model is able to replicate the equity premium and the Sharpe values observed empirically, reflects the similarity of the cross-correlation structure between asset returns and aggregate output in the two sectors, and generally succeeds in capturing both the weak predictability of the real risk-free rate and the good predictability of excess returns at the bi-sectoral level. (Copyright: Elsevier)

Keywords: Asset prices; Business Cycles; Equity Premium; Investment Sector; Consumption Sector (search for similar items in EconPapers)
JEL-codes: C63 E22 E32 G12 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Cyclical Asset Returns in the Consumption and Investment Goods Sector (2013)
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DOI: 10.1016/j.red.2017.07.008

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