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Cited by 75Financial Markets and Investment StrategiesDecision-Making and Behavioral EconomicsFinancial Literacy, Pension, Retirement Analysis

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A New Test of Risk Factor Relevance

Open access
CHINCO, ALEX, HARTZMARK, SAMUEL M., SUSSMAN, ABIGAIL B.·2022·The Journal of Finance
DOI 10.1111/jofi.13135
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Abstract

ABSTRACT Textbook models assume that investors try to insure against bad states of the world associated with specific risk factors when investing. This is a testable assumption and we develop a survey framework for doing so. Our framework can be applied to any risk factor. We demonstrate the approach using consumption growth, which makes our results applicable to most modern asset‐pricing models. Participants respond to changes in the mean and volatility of stock returns consistent with textbook models, but we find no evidence that they view an asset's correlation with consumption growth as relevant to investment decisions.

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Metadata

Authors
CHINCO, A., HARTZMARK, S. M., & SUSSMAN, A. B.
Affiliations
Baruch College (US)
Corresponding author
SUSSMAN, ABIGAIL B.
ORCID
Venue
The Journal of Finance
Publisher
Wiley
Published
2022-05-26
Volume
77
Issue
4
Pages
2183-2238
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/jofi.13135
OpenAlex
W4226466877
Cited by
75
References
9
Citations by year
2026: 9 · 2025: 19 · 2024: 13 · 2023: 12 · 2022: 10
FWCI
9.89
Type
journal article
Language
en
Open access
Licence
Locations
The Journal of Finance (publishedVersion, cc-by-nc-nd)
Funders
National Natural Science Foundation of China
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Literacy, Pension, Retirement Analysis
Keywords
consumption growth, asset pricing, investor risk preference, stock return volatility, risk aversion

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