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Journal of Finance Vol. 47 No. 2 1992

Seasonality and Consumption‐Based Asset Pricing

Wayne E. Ferson; Campbell R. Harvey1

1 Ferson is from the Graduate School of Business at the University of Chicago, Chicago IL 60637. Harvey is from the Fuqua School of Business at Duke University, Durham NC 27706. We thank Sandra Betton, George Constantinides, Kenneth French, Joel Hasbrouck, Lars Hansen, Ravi Jagannathan, Allan Kleidon,

Abstract

Most of the evidence on consumption‐based asset pricing is based on seasonally adjusted consumption data. The consumption‐based models have not worked well for explaining asset returns, but with seasonally adjusted data there are reasons to expect spurious rejections of the models. This paper examines asset pricing models using not seasonally adjusted aggregate consumption data. We find evidence against models with time‐separable preferences, even when the models incorporate seasonality and allow seasonal heteroskedasticity. A model that uses not seasonally adjusted consumption data and nonseparable preferences with seasonal effects works better according to several criteria. The parameter estimates imply a form of seasonal habit persistence in aggregate consumption expenditures.

DOI
10.1111/j.1540-6261.1992.tb04400.x
Volume
47
Issue
2
Pages
511-552
Language
en
Sources
openalex crossref

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