Housing, Consumption, and Asset Pricing
- Topics:
- Investment and Capital Markets
- Tags:
- Asset,
- Asset Management,
- Asset Pricing,
- Business Operations,
- Consumption,
- Finance,
- Investment,
- Operational Planning,
- Stanford University
- Source:
- Stanford University
FREE Registration is required
Overview: This paper builds an equilibrium asset pricing model with housing consumption. Agents care about the composition of a consumption basket that contains shelter and other goods. The presence of composition risk increases the mean and variance of excess stock returns and lowers the risk free rate. Stock prices exhibit mean reversion because they depend on the expenditure share of non-housing consumption. The paper shows that this state variable indeed forecasts excess returns. It also helps account for the value and small firm premia.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 392KB | Date: May 2003 | Pages: 38
