Short-run and Long-run Consumption Risks, Dividend Processes and Asset Returns
نویسندگان
چکیده
We examine the implications of shortand long-run consumption growth fluctuations on the momentum and contrarian profits and the value premium in a unified economic framework. By allowing time-varying firm cash flow exposures to the short-run and long-run shocks in consumption growth, we find the otherwise standard intertemporal asset pricing model goes a long way in generating the momentum and contrarian profits and the value premium. The model also reproduce the size effect, the pairwise correlations between the profitabilities of these investment strategies, and the performance of the standard CAPM and the consumption-based CAPM in explaining these well-documented return behaviors. JEL Classifications: G12, E44
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