Consumption Volatility Risk

Oliver Boguth, Lars Alexander Kuehn

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

Abstract

We show that time variation in macroeconomic uncertainty affects asset prices. Consumption volatility is a negatively priced source of risk for a wide variety of test portfolios. At the firm level, exposure to consumption volatility risk predicts future returns, generating a spread across quintile portfolios in excess of 7% annually. This premium is explained by cross-sectional differences in the sensitivity of dividend volatility to consumption volatility. Stocks with volatile cash flows in uncertain aggregate times require higher expected returns.

Original languageEnglish (US)
Pages (from-to)2589-2615
Number of pages27
JournalJournal of Finance
Volume68
Issue number6
DOIs
StatePublished - Dec 1 2013

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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