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Multifactor consumption based asset pricing models using the US stock market as a reference: Evidence from a panel of developed economies

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  • Hunter, John
  • Wu, Feng

Abstract

This article considers a panel framework to test consumption based asset pricing models driven by a US stock market reference for a number of developed economies. Specifically, we focus on a linearized form of what might be seen as a consumption-based capital asset pricing model in a pooled cross section panel with two-way error components. The empirical findings of this multifactor model using a range of specifications indicate that there is a significant unobserved heterogeneity captured by cross-country fixed effects when consumption growth is treated as a common factor. However, the cross-sectional impact of home consumption growth can vary over the countries, where unobserved heterogeneity in the rate of risk aversion can also be addressed by random effects.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 36 (2014)
Issue (Month): C ()
Pages: 557-565

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Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:557-565

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Consumption based asset pricing model; Multi-factor model; Panel estimation; Fixed effects;

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References

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Cited by:
  1. Hasim Akça & Ahmet Yilmaz Ata & Coskun Karaca, 2012. "Inflation and Corruption Relationship: Evidence from Panel Data in Developed and Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 281-295.

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