NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Consumption Risk and International Asset Returns: Some Empirical Evidence

Robert E. Cumby

NBER Working Paper No. 2383
Issued in September 1987
NBER Program(s):   ME   ITI   IFM

The paper examines if real stock returns in four countries are consistent with consumption-based models of international asset pricing. The paper finds that ex-ante real stock returns exhibit statistically significant fluctuations over time and that these fluctuations cannot be explained by consumption-based models when the conditional covariances between real stock returns and the rate of change of consumption are assumed to be constant over time. These conditional covariances are then modeled and the paper finds that they too exhibit statistically significant fluctuations over time. However, even when conditional covariances are allowed to change over time, the paper finds that the consumption-based models do not fully explain real stock returns.

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Document Object Identifier (DOI): 10.3386/w2383

Published: Journal of International Money and Finance, Vol. 9, no. 2, June 1990.

 
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