Are the latent variables in time-varying expected returns compensations for consumption risk?

Article Abstract:

Multibeta asset pricing models are examined using proxies for economic state variables in a framework which exploits time-varying expected returns to estimate conditional betas. Examples include multiple consumption-beta models and models where asset returns proxy for the state variable. When the state variables are not specified, the tests indicate two or three time-varying expected risk premiums in the sample of quarterly asset returns. Conditional betas relative to consumption generate less striking evidence against the model than betas relative to asset returns, but both the consumption and the market variables fail to proxy for the state variable. (Reprinted by permission of the publisher.)

Finance, Latent variables, Latent structure analysis

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Changes in expected security returns, risk, and level of interest rates

Article Abstract:

Regressions of security returns on treasury bill rates provide insight about the behavior of risk in rational asset pricing models. The information in one-month bill rates implies time variation in the conditional covariances of portfolios of stocks and fixed-income securities with benchmark pricing variables, over extended samples and within five-year subperiods. There is evidence of changes in conditional "betas" associated with interest rates. Consumption and stock market data are examined as proxies for marginal utility, in a general framework for asset pricing with time-varying conditional covariances. (Reprinted by permission of the publisher.)

Evaluation, Stock-exchange, Stock exchanges, Risk (Economics), Investments, Interest rates, Consumption (Economics), Return on investment, Rate of return, Treasury bonds

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Spurious regressions in financial economics?

Article Abstract:

The results of tests of regression models for common stock returns are provided.

Methods, Models, Prices and rates, Stocks, Stock prices, Data warehousing, Regression analysis, Data warehousing/data mining, Data mining

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