Consumption, aggregate wealth and expected stock returns

By Martin Lettau, Sydney C. Ludvigson. 2001

2,123 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/493cf3b988780efde51a84e87af276d0becc2103

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Citations in the corpus

Long-Run Stockholder Consumption Risk and Asset Returns (2009, methodology): “We are grateful to David Chapman, John Cochrane, Lauren Cohen, Joshua Coval, Eugene Fama, Francisco Gomes, Lars Hansen, John Heaton, Ravi Jagannathan, Arvind Krishnamurthy, Sydney Ludvigson, Jonathan Parker, Monika Piazzesi, Jacob Sagi, Amir Yaron, Moto Yogo, and seminar participants at the Northwes”
An Intertemporal CAPM with Stochastic Volatility (2018, background): “We not only explore different ways to measure the market’s valuation ratio but also include other variables known to forecast aggregate returns and market volatility, specifically Lettau and Ludvigson’s (2001) CAY variable and our quarterly FIGARCH forecast.”
Elusive Return Predictability (2008, background): “Indeed, as noted by Lettau and Ludvigsson (2001), Schwert (2002) and others, return prediction models based on valuation ratios such as the dividend yield seemed to break down.”
The Wealth-Consumption Ratio (2008, positive): “…traded companies is measured precisely, and this may explain why the dynamics of the household net worth series are to a large extent driven by variation in stock prices (Lettau and Ludvigson (2001a)).22 Finally, it is reassuring that our non-human wealth measure exceeds the net worth series.”
CAPM for Estimating the Cost of Equity Capital: Interpreting the Empirical Evidence (2009, neutral): “Similar evidences are provided in the context of consumption-CAPM by Lettau and Ludvigson (2001), Santos and Veronesi (2006), and Lustig and Van Nieuwerburgh (2005). value stocks.”
Market Expectations in the Cross Section of Present Values (2012, positive): “Among the alternatives, the best univariate forecasts at the annual horizon (Panel A) are achieved by cay (Lettau and Ludvigson 2001), which delivers an in-sample R2 of 14.9% and an outof-sample R2 of 2.5%, showing statistically significant predictive power at the 1% level.15 Other successful…”
Rational Inattention and Portfolio Selection (2007, methodology): “…of stocks traded on the New York Stock Exchange (NYSE) and Xt represents the estimated trend deviation variable, cayt, for the consumption-wealth ratio as used by Lettau and Ludvigson (2001) to predict stock return.14 µ0, µ1, g0, g1, σS, σX , and ρ are all constant parameters to be estimated.”
Forecasting real estate prices (2012, background): “This argument has been made by Lettau and Ludvigson (2001) and Koijen and Van Binsbergen (2010) in the context ofs ck returns.”
A consumption-based model of the term structure of interest rates ☆ (2006, positive): “As the price–dividend ratio is often taken to be a measure of the business cycle (e.g., Lettau and Ludvingson, 2001), this confirms the intuition that St is a procyclical variable.”
Housing, Consumption and Asset Pricing (2007, neutral): “We follow the convention of excluding shoes and clothing, because they may be viewed as durable (see, for example, Lettau and Ludvigson, 2001).”
Appendix: Monetary Policy Drivers of Bond and Equity Risks (2020, positive): “Risk premia increase when surplus consumption and the output gap are low, consistent with the empirical evidence on stock and bond return predictability (Chen 1991, Cochrane 2007, Cochrane and Piazzesi 2005, Fama 1990, Fama and French 1989, Lamont 1998, Lettau and Ludvigson 2001).”
The short of it (2012, neutral): “Cay is the consumption-wealth variable deﬁned in Lettau and Ludvigson (2001).”