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Cross-sectional consumption-based asset pricing: A reappraisal

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  • Engsted, Tom
  • Møller, Stig V.

Abstract

The consumption-based asset pricing model with constant relative risk aversion explains the size and value premiums in US data over the period 1929 to 2014. The timing convention used for consumption is crucial for this result. The model matches the cross-sectional variation in mean returns on size and value portfolios with beginning-of-period consumption, but the fit of the model completely breaks down with end-of-period consumption.

Suggested Citation

  • Engsted, Tom & Møller, Stig V., 2015. "Cross-sectional consumption-based asset pricing: A reappraisal," Economics Letters, Elsevier, vol. 132(C), pages 101-104.
    • Handle: RePEc:eee:ecolet:v:132:y:2015:i:c:p:101-104
    DOI: 10.1016/j.econlet.2015.04.031
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    References listed on IDEAS

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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