Idiosyncratic consumption risk and the cross section of asset returns

• 成果类型: Article
• 署名作者: Jacobs, K; Wang, KQ
• 署名单位: McGill University; University of Toronto
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00697.x
• 发表日期: 2004
• 页码: 2211-2252
• 关键词: consumer expenditure survey; equity premium puzzle; incomplete markets; habit formation; PRICING-MODELS; intertemporal substitution; Heterogeneous consumers; STOCHASTIC CONSUMPTION; generalized-method; temporal behavior

摘要

This paper investigates the importance of idiosyncratic consumption risk for the cross-sectional variation in asset returns. We find that besides the rate of aggregate consumption growth, the cross-sectional variance of consumption growth is also a priced factor. This suggests that consumers are not fully insured against idiosyncratic consumption risk, and that asset returns reflect their attempts to reduce their exposure to this risk. The resulting two-factor consumption-based asset pricing model significantly outperforms the CAPM, and its performance compares favorably with that of the Fama-French three-factor model.