 Stock returns and consumption factors in the Australian market: Cross-sectional testsBin Li, Benjamin Liu and Eduardo Roca Australian Journal of Management, 2011, vol. 36, issue 2, 247-266 Abstract: We test conditional consumption capital asset pricing models (CCAPMs) in the Australian equity market. The conditional variables used are Lettau and Ludvigson’s (2001a , b ) consumption–wealth ratio, Campbell and Cochrane’s (1999) surplus consumption ratio and Santos and Veronesi’s (2006) labour income to consumption ratio. We examine the cross-sectional implications of these variables using the Fama–French 25 size and book-to-market portfolios and Australian industry portfolios. The Fama–MacBeth (1973) cross-sectional regressions on the 25 size/book-to-market portfolios show that the conditional models perform better than the unconditional models. However, these conditional models cannot outperform the Fama–French three-factor model. The conditional CCAPM, with the labour income to consumption ratio as a scaling factor, can match more closely the performance of the Fama–French three-factor model. We also find that consumption growth is non-contemporaneously related to portfolio returns. Keywords: consumption-based CAPM; consumption-wealth ratio; surplus consumption; labour income; conditional model; asset pricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:36:y:2011:i:2:p:247-266 Access Statistics for this article More articles in Australian Journal of Management from Australian School of Business |
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