Income Hedging, Dynamic Style Preferences, and Return Predictability

• 成果类型: Article
• 署名作者: Addoum, Jawad M.; Delikouras, Stefanos; Korniotis, George M.; Kumar, Alok
• 署名单位: Cornell University; University of Miami
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12775
• 发表日期: 2019
• 页码: 2055-2106
• 关键词: lifetime portfolio selection; cross-section; LABOR-INCOME; excess volatility; Expected returns; risk premia; STOCK; consumption; CHOICE; INVESTMENT

摘要

We propose a theoretical measure of income hedging demand and show that it affects asset prices. We focus on the value factor and first demonstrate that our demand estimates are correlated with the actual demands of retail and mutual fund investors. We then show that the aggregate high-minus-low (HML) demand predicts HML returns. Exploiting the state-level variation in income risk, we demonstrate that state-level hedging demands predict state-level HML returns. A long-short portfolio that exploits this hedging-induced predictability earns an annualized risk-adjusted return of 6%.