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Asset holders’ consumption risk and tests of conditional CCAPM

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  • Elkamhi, Redouane
  • Jo, Chanik

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.

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  • Elkamhi, Redouane & Jo, Chanik, 2023. "Asset holders’ consumption risk and tests of conditional CCAPM," Journal of Financial Economics, Elsevier, vol. 148(3), pages 220-244.
    • Handle: RePEc:eee:jfinec:v:148:y:2023:i:3:p:220-244
    DOI: 10.1016/j.jfineco.2023.04.002
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    More about this item

    Keywords

    Conditional asset pricing test; Consumption CAPM; Conditional amount of consumption risk; Conditional price of consumption risk; Conditional value premium puzzle;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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