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Abstract

We examine the ability of a dynamic asset-pricing model to explain the returns on G7-country stock market indices. We extend Campbell's (1996) asset-pricing model to investigate international equity returns. We also utilize and evaluate recent evidence on the predictability of stock returns. We find some evidence for the role of hedging demands in explaining stock returns and compare the predictions of the dynamic model to those from the static CAPM. Both models fail in their predictions of average returns on portfolios of high book-to-market stocks across countries. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1008713724886
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 6 (1999)
Issue (Month): 4 (November)
Pages: 597-620

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Handle: RePEc:kap:itaxpf:v:6:y:1999:i:4:p:597-620

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: capital asset pricing model (CAPM); international stock returns; intertemporal hedging;

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Find related papers by JEL classification:

• G0 - Financial Economics - - General
• F3 - International Economics - - International Finance

References

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19. repec:fth:harver:1421 is not listed on IDEAS
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Citations

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Cited by:

1. Lettau, Martin & Ludvigson, Sydney, 1999. "Consumption, Aggregate Wealth and Expected Stock Returns," CEPR Discussion Papers 2223, C.E.P.R. Discussion Papers.
   
   • Martin Lettau, 2001. "Consumption, Aggregate Wealth, and Expected Stock Returns," Journal of Finance, American Finance Association, vol. 56(3), pages 815-849, 06.
   • Sydney Ludvigson & Martin Lettau, 1999. "Consumption, aggregate wealth and expected stock returns," Staff Reports 77, Federal Reserve Bank of New York.
2. Tobias Adrian & Erkko Etula, 2010. "Funding liquidity risk and the cross-section of stock returns," Staff Reports 464, Federal Reserve Bank of New York.
3. Gregory Connor & Oliver Linton, 2006. "Semiparametric Estimation of aCharacteristic-based Factor Model ofCommon Stock Returns," STICERD - Econometrics Paper Series /2006/506, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
   
   • Connor, Gregory & Linton, Oliver, 2007. "Semiparametric estimation of a characteristic-based factor model of common stock returns," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 694-717, December.
4. Martin Lettau & Sydney Ludvigson, 2001. "Resurrecting the (C)CAPM: A Cross-Sectional Test When Risk Premia Are Time-Varying," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1238-1287, December.
   
   • Martin Lettau & Sydney Ludvigson, 1999. "Resurrecting the (C)CAPM: a cross-sectional test when risk premia are time-varying," Staff Reports 93, Federal Reserve Bank of New York.
5. Michael R. King & Dan Segal, 2003. "Valuation of Canadian- vs. U.S.-Listed Equity: Is There a Discount?," Working Papers 03-6, Bank of Canada.
6. John Y. Campbell & Tuomo Vuolteenaho, 2003. "Bad Beta, Good Beta," Harvard Institute of Economic Research Working Papers 2016, Harvard - Institute of Economic Research.
   
   • John Y. Campbell & Tuomo Vuolteenaho, 2004. "Bad Beta, Good Beta," American Economic Review, American Economic Association, vol. 94(5), pages 1249-1275, December.
   • Vuolteenaho, Tuomo & Campbell, John, 2004. "Bad Beta, Good Beta," Scholarly Articles 3122489, Harvard University Department of Economics.
   • John Y. Campbell & Tuomo Vuolteenaho, 2003. "Bad Beta, Good Beta," NBER Working Papers 9509, National Bureau of Economic Research, Inc.
   • John Y. Campbell & Tuomo Vuolteenaho, 2002. "Bad Beta, Good Beta," Harvard Institute of Economic Research Working Papers 1971, Harvard - Institute of Economic Research.
7. Cesare Robotti, 2001. "The price of inflation and foreign exchange risk in international equity markets," Working Paper 2001-26, Federal Reserve Bank of Atlanta.
8. Li, Kai & Sarkar, Asani & Wang, Zhenyu, 2003. "Diversification benefits of emerging markets subject to portfolio constraints," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 57-80, February.
9. Zhenyu Wang & Asani Sarkar & Kai Li, 1999. "Assessing the impact of short-sale constraints on the gains from international diversification," Staff Reports 89, Federal Reserve Bank of New York.
10. Tyler Muir & Erkko Etula & Tobias Adrian, 2011. "Broker-Dealer Leverage and the Cross-Section of Stock Returns," 2011 Meeting Papers 1448, Society for Economic Dynamics.

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