재무연구 제 권 호 (2016년 5월)
Asian Review of Financial Research, Vol., No..
pp.1545~1572
pp.1545~1572
Ultimate consumption risk and investment-based stock returns
Hankil Kang College of Business, Korea Advanced Institute of Science and Technology (KAIST), Seoul, Korea
Jangkoo Kang Graduate School of Finance & Accounting, College of Business, Korea Advanced Institute of Science and Technology (KAIST), Seoul, Korea
Changjun Lee College of Business Administration, Hankuk University of Foreign Studies
We show that the ultimate consumption model proposed by Parker and Julliard (2005) well explains the cross-section of investment-based stock returns. By the generalized method of moment (GMM) estimation, we find that the ultimate consumption model with horizons from 3 years to 4 years has superior performance to the contemporaneous consumption model. The linearized model’s performance is comparable to that of the Fama-French and Chen-Roll-Ross model. We argue that the better performance of the ultimate model is linked to the relationship between business-cycle frequency consumption shocks and investment-based returns.
Hankil Kang
Jangkoo Kang
Changjun Lee
We show that the ultimate consumption model proposed by Parker and Julliard (2005) well explains the cross-section of investment-based stock returns. By the generalized method of moment (GMM) estimation, we find that the ultimate consumption model with horizons from 3 years to 4 years has superior performance to the contemporaneous consumption model. The linearized model’s performance is comparable to that of the Fama-French and Chen-Roll-Ross model. We argue that the better performance of the ultimate model is linked to the relationship between business-cycle frequency consumption shocks and investment-based returns.
