Cross-Sectional Consumption-Based Asset Pricing: A Reappraisal

10 Pages Posted: 3 Feb 2011 Last revised: 9 Apr 2015

See all articles by Tom Engsted

Tom Engsted

University of Aarhus - CREATES

Stig Vinther Møller

Aarhus University - CREATES

Date Written: April 2, 2015

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.

Keywords: Consumption-based model, beginning-of-period timing convention, size and value premiums

JEL Classification: G12

Suggested Citation

Engsted, Tom and Møller, Stig Vinther, Cross-Sectional Consumption-Based Asset Pricing: A Reappraisal (April 2, 2015). Available at SSRN: https://ssrn.com/abstract=1754019 or http://dx.doi.org/10.2139/ssrn.1754019

Tom Engsted

University of Aarhus - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Stig Vinther Møller (Contact Author)

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000
Denmark

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