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Consumption, money and excess returns

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  • Maik Schmeling

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.

Suggested Citation

  • Maik Schmeling, 2011. "Consumption, money and excess returns," Applied Economics, Taylor & Francis Journals, vol. 43(20), pages 2559-2563.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:20:p:2559-2563
    DOI: 10.1080/00036840903299730
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    References listed on IDEAS

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