Estimating C-CAPM and the Equity Premium over the Frequency Domain

Panopoulou, Ekaterini, Kalyvitis, Sarantis (2013) Estimating C-CAPM and the Equity Premium over the Frequency Domain. Studies in Nonlinear Dynamics and Econometrics, 17 (5). pp. 551-571. E-ISSN 1558-3708. (doi:10.1515/snde-2013-0019) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:34627)

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Official URL: http://dx.doi.org/10.1515/snde-2013-0019

Abstract

In this paper we estimate the single-factor Consumption Capital Asset Pricing Model (C-CAPM) over the frequency domain. We modify the standard two-step methodology (Fama and French, 1992) to account for the spectral properties of consumption risk and we find that its lower frequencies explain up to 98% of the cross-sectional variation of expected returns and that the equity premium puzzle is eliminated. These results are robust to the definitions of the variables, the sample span and the set of portfolios utilized, and the maturity of interest rates.

Item Type:	Article
DOI/Identification number:	10.1515/snde-2013-0019
Uncontrolled keywords:	C-CAPM; consumption risk; frequency domain; equity premium; JEL Classification: G11; G12; C13
Subjects:	H Social Sciences > H Social Sciences (General)
Divisions:	Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User:	Catherine Norman
Date Deposited:	12 Jul 2013 13:27 UTC
Last Modified:	16 Feb 2021 12:46 UTC
Resource URI:	https://kar.kent.ac.uk/id/eprint/34627 (The current URI for this page, for reference purposes)

University of Kent Author Information

Panopoulou, Ekaterini.

Creator's ORCID:	https://orcid.org/0000-0001-5080-9965
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