Cointegration and consumption risks in asset returns
By: Ravi Bansal, Robert Dittmar, Dana Kiku
Contributors: Dittmar, Robert; Kiku, Dana; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13108; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13108.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "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 crosssectional variation in equity returns at both short and long horizons; 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"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/16/2007.

Includes bibliographical references.

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