Asset Pricing without Garbage

• 成果类型: Article
• 署名作者: Kroencke, Tim A.
• 署名单位: University of Basel
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12438
• 发表日期: 2017
• 页码: 47-98
• 关键词: CONSUMPTION-BASED EXPLANATION; CROSS-SECTIONAL TEST; time-series models; RUN RISKS MODEL; long-run; temporal behavior; equity premium; STOCHASTIC CONSUMPTION; efficient estimation; stock returns

摘要

This paper provides an explanation for why garbage implies a much lower relative risk aversion in the consumption-based asset pricing model than National Income and Product Accounts (NIPA) consumption expenditure: Unlike garbage, NIPA consumption is filtered to mitigate measurement error. I apply a simple model of the filtering process that allows one to undo the filtering inherent in NIPA consumption. Unfiltered NIPA consumption well explains the equity premium and is priced in the cross-section of stock returns. I discuss the likely properties of true consumption (i.e., without measurement error and filtering) and quantify implications for habit and long-run risk models.