Publications [#266079] of Ravi Bansal

Journal Articles

1. Bansal, R; Dittmar, R; Kiku, D, Cointegration and consumption risks in asset returns, Review of Financial Studies, vol. 22 no. 3 (March, 2009), pp. 1343-1375, Oxford University Press (OUP), ISSN 0893-9454 [doi]
   (last updated on 2024/04/23)

   Abstract:
   We argue that the cointegrating relation between dividends and consumption, a measure of long-run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the asset's beta is dominated by long-run consumption risks. We show that the return betas, derived from the cointegration-based VAR (EC-VAR) model, successfully account for the cross-sectional variation in equity returns at both short and long horizons; however, this is not the case when the cointegrating restriction is ignored. Our evidence highlights the importance of cointegration-based long-run consumption risks for financial markets.