Asset holders' Consumption Risk and Tests of Conditional CCAPM

92 Pages Posted: 4 Apr 2019 Last revised: 3 Apr 2023

See all articles by Redouane Elkamhi

Redouane Elkamhi

University of Toronto - Rotman School of Management

Chanik Jo

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Date Written: April 2, 2023

Abstract

We test the conditional consumption-CAPM using asset holders' consumption and find that the time variation in the prices of asset holders' consumption risk is procyclical. This puzzling time variation is at odds with the implication of existing consumption-based equilibrium asset pricing models. We show that our finding is a salient feature of the data observed in multiple asset classes (aggregate equity market, equity portfolios, bond portfolios, and commodities portfolios), using different measures of consumption (household survey data and high-frequency retail shopping data) and alternative empirical methodologies.

Keywords: Conditional asset pricing test, Consumption CAPM, Conditional amount and price of consumption risk, conditional value premium puzzle

JEL Classification: C14, G10, G12, G17

Suggested Citation

Elkamhi, Redouane and Jo, Chanik, Asset holders' Consumption Risk and Tests of Conditional CCAPM (April 2, 2023). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3349844 or http://dx.doi.org/10.2139/ssrn.3349844

Redouane Elkamhi

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Chanik Jo (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

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