Electricity Consumption and Asset Prices
51 Pages Posted: 15 Mar 2011
There are 2 versions of this paper
Electricity Consumption and Asset Prices
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: Suggested Citation
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