文档介绍：Resurrecting the (C)CAPM: A Cross-Sectional Test When
Risk Premia Are Time-Varying ∗
Martin Lettau
and
Sydney Ludvigson
Federal Reserve Bank of New York
First draft: August 9, 1999
This draft: November 30, 1999
∗Address: Research Department, Federal Reserve Bank of New York, 33 Liberty St., New York,
New York 10045; e-mail: martin.******@ny., and sydney.******@ny.. Lettau is
also affiliated with the CEPR, London. A previous version of this paper was entitled ”A Cross-
Sectional Test ofd Linear Factor Models with Time-Varying Risk Premia.” Updated versions along
with the data on cay can be found at /rmaghome/economist/ and
/rmaghome/economist/. We are grateful to Eugene Fama and Ken-
neth French for graciously providing the portfolio data, to John Cochrane, Ravi Jagannathan and Zhenyu Wang,
and to seminar participants at the National Bureau of Economic Research November 1999 Asset Pricing meeting
and the New York Federal Reserve for ments. Claire Liou provided able research assistance. The
views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of New
York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
Abstract
This paper explores the ability of theoretically-based asset pricing models such as the CAPM
and the consumption CAPMreferred to jointly as the (C)CAPMto explain the cross-section
of average stock returns. Unlike many previous empirical tests of the (C)CAPM, we specify the
pricing kernel as a conditional linear factor model, as would be expected if risk premia vary over
time. Central to our approach is the use of a conditioning variable which proxies for fluctuations
in the log consumption-aggregate wealth ratio and is likely to be important for summarizing
conditional expectations of excess returns. We demonstrate that such conditional factor models
are able to explain a substantial fraction of the cros