Finance Papers

Document Type

Journal Article

Date of this Version

1990

Publication Source

Review of Financial Studies

Volume

3

Issue

2

Start Page

207

Last Page

232

DOI

10.1093/rfs/3.2.207

Abstract

We find that conditional means and variances of consumption growth vary through time, and this variation appears to be associated with the business cycle. A pricing model with fluctuating means and variances of consumption growth provides implications about conditional moments of returns for both short and long investment horizons, and these implications are explored empirically. The U-shaped pattern of first-order autocorrelations of returns, as well as business cycle patterns in the price of risk, appears to be consistent with the model, but our exploration suggests that other implications about conditional return moments are at odds with the data.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/3.2.207.

Share

COinS
 

Date Posted: 27 November 2017

This document has been peer reviewed.