/desautels/taxonomy/term/2963/all en /desautels/channels/news/asset-pricing-countercyclical-household-consumption-risk-286304 <p><strong>Authors: </strong>George M. Constantinides and <a href="/desautels/anisha-ghosh"><strong>Anisha Ghosh</strong></a></p> <p><strong>Publication:</strong> <em>Journal of Finance</em>, Vol. 72, No. 1, February 2017</p> <p><strong>Abstract:</strong></p> <p>We show that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional moments of household consumption growth. The estimated model fits well the unconditional cross-sectional moments of household consumption growth and the moments of the risk-free rate, equity premium, price-dividend ratio, and aggregate dividend and consumption growth. The model-implied risk-free rate and price-dividend ratio are procyclical, while the market return has countercyclical mean and variance. Finally, household consumption risk explains the cross section of excess returns.</p> <p><strong>Read article: </strong><em><a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/jofi.12471" target="_blank">Journal of Finance</a></em></p> <p> Thu, 29 Mar 2018 17:39:11 +0000 julie.lapalme@mcgill.ca 68566 at /desautels /desautels/research/desautels-top-tier-publications/journal-finance <p><big>The <em><a href="http://www.afajof.org/details/landingpage/2866131/About-the-JF.html" target="_blank">Journal of Finance</a></em> publishes leading research across all the major fields of financial research. It is one of the most widely cited academic journals on finance and one of the most widely cited journals in all of economics as well. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial institutions around the world.</big></p> Fri, 21 Jul 2017 16:22:46 +0000 julie.lapalme@mcgill.ca 67663 at /desautels