Bitte verwenden Sie diesen Link, um diese Publikation zu zitieren, oder auf sie als Internetquelle zu verweisen: https://hdl.handle.net/10419/60563 
Erscheinungsjahr: 
2004
Schriftenreihe/Nr.: 
Staff Report No. 181
Verlag: 
Federal Reserve Bank of New York, New York, NY
Zusammenfassung: 
We examine the implications of time variation in the correlation between the equity premium and nondurable consumption growth for equity return dynamics in G-7 countries. Using a VAR-GARCH (1,1) model, we find that the correlation increases with recession indicators such as above-average unemployment growth and with proxies for stock market wealth. The combined effect is that the correlation increases during a recession. We find that the effect of a countercyclical correlation is that the equity premium, Sharpe ratio, and risk aversion are also generally countercyclical. These findings survive several robustness checks such as allowing the mean return to depend on its conditional variance and controlling for lower consumption volatility during the post-1990 period. The evidence is stronger for countries that have larger stock market capitalization relative to GDP. Our results show the importance of combining financial and macroeconomic indicators for explaining time variation in the consumption correlation and the equity premium.
JEL: 
G12
G15
Dokumentart: 
Working Paper

Datei(en):
Datei
Größe
989.73 kB





Publikationen in EconStor sind urheberrechtlich geschützt.