Consumption, change in expectations and equity returns

Margot Quijano

Applied Financial Economics, 2013, vol. 23, issue 24, 1839-1851

Abstract: Using quarterly data for the period 1959 to 2008, I study the relationship between excess stock returns and the change in expectations of the consumption--wealth ratio and of future long-run consumption growth. Using a vector error correction model (VECM), I estimate revisions in expectations on the consumption--wealth ratio and on the discounted value of future consumption growth; the latter being of high relevance in the asset pricing literature but difficult to identify empirically. My findings show that these variables are strong predictors of future excess stock returns when compared to several common predictor variables. Furthermore, these results seem to be robust in out-of-sample and in-sample analyses, and appear not to be driven by persistence.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/09603107.2013.856996 (text/html)
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:taf:apfiec:v:23:y:2013:i:24:p:1839-1851

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2013.856996

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().