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Consumption Risk (consumption + risk)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Long-Run Stockholder Consumption Risk and Asset Returns

THE JOURNAL OF FINANCE, Issue 6 2009
CHRISTOPHER J. MALLOY
ABSTRACT We provide new evidence on the success of long-run risks in asset pricing by focusing on the risks borne by,stockholders. Exploiting microlevel household consumption data, we show that long-run stockholder consumption risk better captures cross-sectional variation in average asset returns than aggregate or nonstockholder consumption risk, and implies more plausible risk aversion estimates. We find that risk aversion around 10 can match observed risk premia for the wealthiest stockholders across sets of test assets that include the 25 Fama and French portfolios, the market portfolio, bond portfolios, and the entire cross-section of stocks. [source]

Cash Flow, Consumption Risk, and the Cross-section of Stock Returns

THE JOURNAL OF FINANCE, Issue 2 2009
ZHI DA
ABSTRACT I link an asset's risk premium to two characteristics of its underlying cash flow: covariance and duration. Using empirically novel estimates of both cash flow characteristics based exclusively on accounting earnings and aggregate consumption data, I examine their dynamic interaction in a two-factor cash flow model and find that they are able to explain up to 82% of the cross-sectional variation in the average returns on size, book-to-market, and long-term reversal-sorted portfolios for the period 1964 to 2002. This finding highlights the importance of fundamental cash flow characteristics in determining the risk exposure of an asset. [source]

Implications for Asset Pricing Puzzles of a Roll-over Assumption for the Risk-Free Asset,

INTERNATIONAL REVIEW OF FINANCE, Issue 3-4 2008
GEOFFREY J. WARREN
ABSTRACT The equity risk premium and risk-free rate puzzles are largely resolved by combining persistent uncertainty over the long-term consumption growth rate with analysis of the risk-free asset on a ,roll-over' basis. Under these conditions, cash equivalents are evaluated as a multi-period investment strategy that hedges against adverse growth rate outcomes. The premium on the risky asset is raised and the risk-free rate lowered due to their respective relation with multi-period consumption risk. Historical average asset returns are matched at plausible risk aversion. [source]