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The Spirit of Capitalism and Asset Pricing: An Empirical Investigation

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Author Info
Qiang Zhang (University of Memphis)

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Abstract

We extend and test two models of asset pricing that feature status-seeking through accumulation of not only financial and real assets but also human capital. We use weak-identification robust tests to confront these models with U.S. aggregate data. Contrary to previous results, we find that the spirit of capitalism hypothesis, modeled as either direct preference for wealth or pursuit of relative wealth status, is rejected. Therefore, adding status motive alone to an otherwise standard model may not be sufficient to resolve the equity premium puzzle.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Topics in Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 3 ()
Pages: 1418-1418
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Handle: RePEc:bep:mactop:v:6:y:2006:i:3:p:1418-1418

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Related research
Keywords: spirit of capitalism asset pricing equity premium human capital GMM weak-identification robust tests

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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    Other versions:
  2. Zhang, Qiang, 2006. "Human Capital, Weak Identification, and Asset Pricing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 873-899, June. [Downloadable!] (restricted)
  3. Hansen, Lars Peter & Jagannathan, Ravi, 1991. "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 225-62, April. [Downloadable!] (restricted)
    Other versions:
  4. Smith, William T, 2001. "How Does the Spirit of Capitalism Affect Stock Market Prices?," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 14(4), pages 1215-32.
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    Other versions:
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  16. Ignacio Palacios-Huerta, 2003. "The Robustness of the Conditional CAPM with Human Capital," Journal of Financial Econometrics, Oxford University Press, vol. 1(2), pages 272-289.
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  19. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "The Spirit of Capitalism and Stock-Market Prices," American Economic Review, American Economic Association, vol. 86(1), pages 133-57, March. [Downloadable!] (restricted)
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