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Cyclical Asset Returns in the Consumption and Investment Goods Sector
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Cyclical Asset Returns in the Consumption and Investment Goods Sector

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  • Heer, Burkhard
  • Maußner, Alfred
  • Süssmuth, Bernd

Abstract

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we onsider a standard two-sector real-business cycle model with habit formation and sector-specific adjustment costs of capital. The model is able to replicate the equity premium and the Sharpe values observed empirically. In addition, we are able to match the empirical fact that equity returns in the two sectors are not correlated with output.

Suggested Citation

  • Heer, Burkhard & Maußner, Alfred & Süssmuth, Bernd, 2014. "Cyclical Asset Returns in the Consumption and Investment Goods Sector," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100319, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100319
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    1. Burkhard Heer & Alfred Maussner & Bernd Suessmuth, 2018. "Cyclical Asset Returns in the Consumption and Investment Goods Sector," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 51-70, April.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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