Cointegration and consumption risks in asset returns
Publication
, Journal Article
Bansal, R; Dittmar, R; Kiku, D
Published in: Review of Financial Studies
March 1, 2009
We argue that the cointegrating relation between dividends and consumption, a measure of long-run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the asset's beta is dominated by long-run consumption risks. We show that the return betas, derived from the cointegration-based VAR (EC-VAR) model, successfully account for the cross-sectional variation in equity returns at both short and long horizons; however, this is not the case when the cointegrating restriction is ignored. Our evidence highlights the importance of cointegration-based long-run consumption risks for financial markets.
Duke Scholars
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Published In
Review of Financial Studies
DOI
EISSN
1465-7368
ISSN
0893-9454
Publication Date
March 1, 2009
Volume
22
Issue
3
Start / End Page
1343 / 1375
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory
Citation
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MLA
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Bansal, R., Dittmar, R., & Kiku, D. (2009). Cointegration and consumption risks in asset returns. Review of Financial Studies, 22(3), 1343–1375. https://doi.org/10.1093/rfs/hhm085
Bansal, R., R. Dittmar, and D. Kiku. “Cointegration and consumption risks in asset returns.” Review of Financial Studies 22, no. 3 (March 1, 2009): 1343–75. https://doi.org/10.1093/rfs/hhm085.
Bansal R, Dittmar R, Kiku D. Cointegration and consumption risks in asset returns. Review of Financial Studies. 2009 Mar 1;22(3):1343–75.
Bansal, R., et al. “Cointegration and consumption risks in asset returns.” Review of Financial Studies, vol. 22, no. 3, Mar. 2009, pp. 1343–75. Scopus, doi:10.1093/rfs/hhm085.
Bansal R, Dittmar R, Kiku D. Cointegration and consumption risks in asset returns. Review of Financial Studies. 2009 Mar 1;22(3):1343–1375.
Published In
Review of Financial Studies
DOI
EISSN
1465-7368
ISSN
0893-9454
Publication Date
March 1, 2009
Volume
22
Issue
3
Start / End Page
1343 / 1375
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory