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 language | English |
|---|---|
| Pages (from-to) | 489–524 |
| Number of pages | 41 |
| Journal | Annals of Economics and Finance |
| Volume | 20 |
| Issue number | 2 |
| Early online date | 18 Oct 2018 |
| Publication status | Published - Nov 2019 |
Keywords
- Equity Risk Premium
- Consumption Wealth Channel
- Consumption Shocks
- Structural Vector Autoregression
- Asset Pricing