Consumption, money and excess returns
Abstract:We augment the standard Consumption Capital Asset Pricing Model (CCAPM) by the growth in money holdings and empirically investigate whether money is helpful for pricing a cross-section of US excess returns. We find that the growth in M2 significantly improves the fit of the CCAPM with R 2s well above 80% in a cross-section with the three Fama–French factors, the momentum portfolio, a contrarian portfolio and two bond portfolios as test assets.
Document Type: Research Article
Affiliations: Department of Economics,Leibniz Universitaet Hannover, Koenigsworther Platz 1D-30167 Hannover, Germany
Publication date: 2011-08-01