Cyclical Asset Returns in the Consumption and Investment Goods Sector

22 Pages Posted: 29 Aug 2013

See all articles by Burkhard Heer

Burkhard Heer

University of Augsburg; CESifo (Center for Economic Studies and Ifo Institute)

Alfred Maussner

University of Augsburg - Faculty of Business and Economics

Bernd Suessmuth

University of Leipzig

Date Written: August 29, 2013

Abstract

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a standard two-sector real-business cycle model with habit formation and sector-specific adjustment costs of capital. The model is able to replicate the equity premium and the Sharpe values observed empirically. In addition, we are able to match the empirical fact that equity returns in the two sectors are not correlated with output.

Keywords: asset prices, business cycles, equity premium, investment sector, consumption sector

JEL Classification: G120, C630, E220, E320

Suggested Citation

Heer, Burkhard and Maussner, Alfred and Suessmuth, Bernd, Cyclical Asset Returns in the Consumption and Investment Goods Sector (August 29, 2013). CESifo Working Paper Series No. 4364. Available at SSRN: https://ssrn.com/abstract=2317752

Burkhard Heer (Contact Author)

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alfred Maussner

University of Augsburg - Faculty of Business and Economics ( email )

Universitaetsstr. 16
86135 Augsburg
Germany
+49 821 598 4187 (Phone)
+49 821 598 4231 (Fax)

Bernd Suessmuth

University of Leipzig ( email )

Marschnerstrasse 31
D-04109 Leipzig, 04109
Germany

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