This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Resuscitating the C-CAPM: empirical evidence from France and Germany

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Stuart Hyde (Manchester Business School, University of Manchester, U.K.)
Keith Cuthbertson (CASS Business School, 106 Bunhill Row, London EC1Y 8TZ, U.K.)
Dirk Nitzsche (CASS Business School, 106 Bunhill Row, London EC1Y 8TZ, U.K.)

Additional information is available for the following registered author(s):

Abstract

In this paper we analyse whether the consumption based capital asset pricing model is consistent with asset return data from the French and German stock markets. We evaluate the performance of the C-CAPM by applying the non-parametric methodology of Hansen and Jagannathan and adopting five alternative specifications of utility. In addition to standard power utility we adopt the recursive preferences model proposed by Epstein and Zin. We also consider both internal and external habit formation (persistence) using the models proposed by Constantinides, Abel and Campbell and Cochrane. We evaluate our findings using the tests of Burnside and Hansen and Jagannathan. We find that the majority of models produce stochastic discount factors consistent with the data. However, high degrees of risk aversion are implied for the models to be consistent. Incorporating habit formation only partially reduces the implied levels of risk aversion. Copyright © 2005 John Wiley & Sons, Ltd.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1002/ijfe.282
File Format: text/html
File Function: Link to full text; subscription required
Download Restriction: no

Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 10 (2005)
Issue (Month): 4 ()
Pages: 337-357
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ijf:ijfiec:v:10:y:2005:i:4:p:337-357

Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/1076-9307/

Order Information:
Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hansen, Lars Peter & Jagannathan, Ravi, 1997. " Assessing Specification Errors in Stochastic Discount Factor Models," Journal of Finance, American Finance Association, vol. 52(2), pages 557-90, June. [Downloadable!] (restricted)
    Other versions:
  2. Engsted, Tom, 1998. "Evaluating the Consumption-Capital Asset Pricing Model Using Hansen-Jagannathan Bounds: Evidence from the UK," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(4), pages 291-302, October. [Downloadable!] (restricted)
  3. Hansen, Lars Peter & Heaton, John & Luttmer, Erzo G J, 1995. "Econometric Evaluation of Asset Pricing Models," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(2), pages 237-74. [Downloadable!] (restricted)
    Other versions:
  4. Abel, A.B., 1990. "Asset Prices Under Habit Formation And Catching Up With The Joneses," Weiss Center Working Papers 1-90, Wharton School - Weiss Center for International Financial Research.
    Other versions:
  5. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
  6. Stuart Hyde & Mohamed Sherif, 2005. "Consumption Asset Pricing Models: Evidence From The Uk," Manchester School, University of Manchester, vol. 73(3), pages 343-363, 06. [Downloadable!] (restricted)
  7. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-43, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stig V. Møller, 2007. "Habit persistence: Explaining cross sectional variation in returns and time-varying expected returns," CREATES Research Papers 2007-07, School of Economics and Management, University of Aarhus. [Downloadable!]
  2. Tom Engsted & Stuart Hyde & Stig V. Møller, 2007. "Habit Formation, Surplus Consumption and Return Predictability: International Evidence," CREATES Research Papers 2007-31, School of Economics and Management, University of Aarhus. [Downloadable!]
  3. Tom Engsted & Stig V. Møller, 2008. "An iterated GMM procedure for estimating the Campbell-Cochrane habit formation model, with an application to Danish stock and bond returns," CREATES Research Papers 2008-12, School of Economics and Management, University of Aarhus. [Downloadable!]
Statistics
Access and download statistics

Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.