Consumption Correlatedness and Risk Measurement in Economies with Non trade Assets and Heterogeneous Information

Sanford Grossman and Robert Shiller

No 690, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The consumption beta theorem of Breeden makes the expected return on any asset a function only of its covariance with changes in aggregate consumption. It is shown that the theorem is more robust than was indicated by Breeden. The theorem obtains even if one deletes Breeden's assumptions that (a) all risky assets are tradable, (b) investors have homogeneous beliefs, (c) other assets can be traded without transactions costs and (d) that all assets have returns which are Ito processes.

Date: 1981-06
Note: ME
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Published as Grossman, Sanford J. and Robert J. Shiller, "Consumption Correlatedness and Risk Measurement in Economies with Non-traded Assets and Heterogeneous Information." Journal of Financial Economics, Vol. 10, No. 2 (July 1982), pp. 195-210.

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Journal Article: Consumption correlatedness and risk measurement in economies with non-traded assets and heterogeneous information (1982)
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