EconPapers    
Economics at your fingertips  
 

Consumption, Size and Book-to-Market Ratio in Equity Returns

Pongrapeeporn Abhakorn (), Peter Smith () and Michael Wickens

Discussion Papers from Department of Economics, University of York

Abstract: This study extends the standard consumption-based capital asset pricing model (C-CAPM) to include two additional factors related to firm size (SMB) and book-to-market value ratio (HML). The inclusion of HML improves mainly the fit of the low book-to-market portfolios, SMB, and HML that are not correctly priced in the standard C-CAPM. Consumption premium varies across size and coincides with the size effect. The effect of a HML premium is to reduce the amount of consumption premium, implying that low book-to-market ratio and, to a lesser degree, small portfolios are not as risky as consumption predicts. The HML premium across size is contradictory to the size effect as small firms have a larger negative HML premium.

Keywords: Risk Premium; Equity Return; Stochastic Discount Factor; Consumption (search for similar items in EconPapers)
JEL-codes: C32 E44 G12 G14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.york.ac.uk/media/economics/documents/discussionpapers/2011/1124.pdf Main text (application/pdf)

Related works:
Journal Article: What do the Fama–French factors add to C-CAPM? (2013) Downloads
Working Paper: What do the Fama-French factors add to CCAPM? (2013) Downloads
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:yor:yorken:11/24

Access Statistics for this paper

More papers in Discussion Papers from Department of Economics, University of York Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom. Contact information at EDIRC.
Bibliographic data for series maintained by Paul Hodgson ().

 
Page updated 2023-01-24
Handle: RePEc:yor:yorken:11/24