Logo Logo

Lazy Investors, Discretionary Consumption, and the Cross Section of Stock Returns, Journal of Finance

Abstract

When consumption betas of stocks are computed using consumption growth from 4th quarter of one year to the next, the CCAPM explains the cross section of stock returns as well as the Fama and French (1993) three factor model. The CCAPM performance deteriorates substantially when consumption growth is measured over other quarters. For the CCAPM to hold at any given point in time, investors must be making their consumption and investment decisions simultaneously at that point in time. We suspect that it is more likely to happen during the fourth quarter given its larger informational importance and the ending of the tax year.

Type

Article

Author(s)

Ravi Jagannathan, Yong Wang

Date Published

2007

Citations

Jagannathan, Ravi, and Yong Wang. 2007. Lazy Investors, Discretionary Consumption, and the Cross Section of Stock Returns. Journal of Finance. 62(4): 1623-1661.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more