Consumption Volatility Risk

We show that time variation in macroeconomic uncertainty affects asset prices. Consumption volatility is a negatively priced source of risk for a wide variety of test portfolios. At the firm level, exposure to consumption volatility risk predicts future returns, generating a spread across quintile p...

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Veröffentlicht in:The Journal of finance (New York) 2013-12, Vol.68 (6), p.2589-2615
Hauptverfasser: BOGUTH, OLIVER, KUEHN, LARS-ALEXANDER
Format: Artikel
Sprache:eng
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Zusammenfassung:We show that time variation in macroeconomic uncertainty affects asset prices. Consumption volatility is a negatively priced source of risk for a wide variety of test portfolios. At the firm level, exposure to consumption volatility risk predicts future returns, generating a spread across quintile portfolios in excess of 7% annually. This premium is explained by cross-sectional differences in the sensitivity of dividend volatility to consumption volatility. Stocks with volatile cash flows in uncertain aggregate times require higher expected returns.
ISSN:0022-1082
1540-6261
DOI:10.1111/jofi.12058