Consumption, money and excess returns

Maik Schmeling

Applied Economics, 2011, vol. 43, issue 20, 2559-2563

Abstract: We augment the standard Consumption Capital Asset Pricing Model (CCAPM) by the growth in money holdings and empirically investigate whether money is helpful for pricing a cross-section of US excess returns. We find that the growth in M2 significantly improves the fit of the CCAPM with R2s well above 80% in a cross-section with the three Fama-French factors, the momentum portfolio, a contrarian portfolio and two bond portfolios as test assets.

Date: 2011
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DOI: 10.1080/00036840903299730

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