Abstract

http://ssrn.com/abstract=1088816
 
 

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Long-Run Stockholder Consumption Risk and Asset Returns


Annette Vissing-Jorgensen


National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business

Christopher J. Malloy


Harvard Business School; National Bureau of Economic Research (NBER)

Tobias J. Moskowitz


AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

January 30, 2008

Harvard Business School Finance Working Paper No. 08-060

Abstract:     
We provide new evidence on the success of long-run risks in asset pricing by focusing on the risks borne by stockholders. Exploiting micro-level household consumption data, we show that long-run stockholder consumption risk better captures cross-sectional variation in average asset returns than aggregate or non-stockholder consumption risk, and provides more plausible economic magnitudes. We find that risk aversion estimates around 10 can match observed risk premia for the wealthiest stockholders across sets of test assets that include the 25 Fama and French size and value portfolios, the market portfolio, bond portfolios, and the entire cross-section of stocks.

Number of Pages in PDF File: 71

JEL Classification: G12, E21


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Date posted: February 1, 2008  

Suggested Citation

Vissing-Jorgensen, Annette and Malloy, Christopher J. and Moskowitz, Tobias J., Long-Run Stockholder Consumption Risk and Asset Returns (January 30, 2008). Harvard Business School Finance Working Paper No. 08-060. Available at SSRN: http://ssrn.com/abstract=1088816 or http://dx.doi.org/10.2139/ssrn.1088816

Contact Information

Annette Vissing-Jorgensen
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of California Berkeley, Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
Christopher J. Malloy (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Baker Library 277
Boston, MA 02163
United States
617-495-4383 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tobias J. Moskowitz
AQR Capital ( email )
Greenwich, CT
United States

University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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