Cross-Sectional Evidence in Consumption Mismeasurement

34 Pages Posted: 30 Aug 2013

See all articles by Xiao Qiao

Xiao Qiao

Paraconic Technologies US Inc.

Multiple version iconThere are 2 versions of this paper

Date Written: August 28, 2013

Abstract

Filtered consumption growths, constructed from a broad set of macro variables, improve cross-sectional asset pricing on portfolios formed on size, book-to-market equity, and past performance compared to observed consumption growth. I use two methods to construct measures of filtered consumption growth, both of which produce higher cross-sectional R-squareds and lower pricing errors relative to observed consumption growth. Macro variables measuring quantities matter more than macro variables measuring prices in constructing filtered growth.

Keywords: consumption, asset pricing, dimension reduction, cross section

JEL Classification: G12, C33

Suggested Citation

Qiao, Xiao, Cross-Sectional Evidence in Consumption Mismeasurement (August 28, 2013). Available at SSRN: https://ssrn.com/abstract=2317486 or http://dx.doi.org/10.2139/ssrn.2317486

Xiao Qiao (Contact Author)

Paraconic Technologies US Inc. ( email )

New York, NY
United States

HOME PAGE: http://sites.google.com/site/xiaoqiao10/

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