Electricity Consumption and Asset Prices

51 Pages Posted: 15 Mar 2011

See all articles by Zhi Da

Zhi Da

University of Notre Dame - Mendoza College of Business

Hayong Yun

Michigan State University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 14, 2011

Abstract

Electricity consumption is a useful real-time proxy for economic activities, as most modern-day economic activities involve the use of electricity, which cannot be easily stored. Empirically, electricity consumption data is widely available in high frequency at both aggregate and disaggregate levels, allowing many applications in economics. We demonstrate that residential-commercial electricity usage is a better measure of spot consumption for both time series and cross-sectional CCAPM tests. This result is not driven by electricity consumption due to production activities and extreme weather fluctuations. Also, industrial usage of electricity, capturing business cycle variation in real time, predicts future stock excess returns.

Keywords: Consumption-based Capital Asset Pricing Model (CCAPM), electricity consumption, return predictability

JEL Classification: G12, G17

Suggested Citation

Da, Zhi and Yun, Hayong, Electricity Consumption and Asset Prices (March 14, 2011). Available at SSRN: https://ssrn.com/abstract=1785574 or http://dx.doi.org/10.2139/ssrn.1785574

Zhi Da (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Hayong Yun

Michigan State University - Department of Finance ( email )

667 N Shaw Lane, Room 339
East Lansing, MI 48824-1122
United States
517-884-0549 (Phone)

HOME PAGE: http://https://sites.google.com/view/hayongyun/

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