The impact of aggregate and disaggregate consumption shocks on the Equity Risk Premium in the United Kingdom

Pankaj Chandorkar, Sunil Poshakwale

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Abstract

We examine the impact of aggregate and disaggregate consumption shocks on the ex-post Equity Risk Premium (ERP) of FTSE indices and the 25 Fama-French portfolios. Findings suggest that aggregate consumption shocks seem to explain significant time variation in the ERP. At disaggregated level, the ERP increases when the actual consumption is less than expected. Finally, durable and semi-durable consumption shocks have a greater impact on the ERP than non-durable consumption shocks.
Original languageEnglish
Pages (from-to)489–524
Number of pages41
JournalAnnals of Economics and Finance
Volume20
Issue number2
Early online date18 Oct 2018
Publication statusPublished - Nov 2019

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