This study extends the standard consumption-based capital asset pricing model (C-CAPM) to include two additional factors related to firm size (SMB) and book-to-market value ratio (HML). The inclusion of HML improves mainly the fit of the low book-to-market portfolios, SMB, and HML that are not...

We propose a new test based on the no-arbitrage condition that compares cross-sectional variation in equity returns to the cross-sectional variation in their conditional covariance with the discount factors. Using the multivariate generalized heteroskedasticity in mean model (MGM) to estimate...

This paper develops the CCAPM model to allow for long-run risk in durable consumption. Allowing Epstein-Zin preferences to incorporate non-separability of durable and non-durable consumption in utility provides for an Euler equation which can be shown to provide a much better explanation of...

The price of aggregate risk in the UK appears to have risen significantly since the start of the financial crisis and the associated extended recession. This paper examines the relationship between the business cycle and equity market returns to see how robust this association is. Several...