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Human Capital, Weak Identification, and Asset Pricing

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  • Zhang, Qiang

Abstract

I develop a new approach to accounting for human capital and essentially all stock and non-stock wealth in estimating the return on wealth portfolio. Using the estimated return and aggregate U.S. data in weak-identification robust tests of the Epstein and Zin (1991) and Weil (1990) model, I find that the model can simultaneously match the historical average equity premium, risk-free rate, and stock return volatility with reasonable parameter values.

Suggested Citation

  • 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.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:4:p:873-899
    DOI: 10.1353/mcb.2006.0063
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    Cited by:

    1. Qiang Zhang, 2006. "The Spirit of Capitalism and Asset Pricing: an Empirical Investigation (Subsequently published in "The B.E. Journal of Macroeconomics (Topics in Macroeconomics)", 2006, Vol. 6, Issue 3, Arti," CARF F-Series CARF-F-069, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Zhang Qiang, 2006. "The Spirit of Capitalism and Asset Pricing: An Empirical Investigation," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-25, November.
    3. Dreyer, Johannes K. & Schneider, Johannes & Smith, William T., 2013. "Saving-based asset-pricing," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3704-3715.
    4. William F. Blankenau & Steven P. Cassou, 2009. "Industrial Dynamics And The Neoclassical Growth Model," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 815-837, October.
    5. Stefano d’Addona & Christos Giannikos, 2014. "Asset pricing and the role of macroeconomic volatility," Annals of Finance, Springer, vol. 10(2), pages 197-215, May.
    6. Smith, William T. & Zhang, Qiang, 2007. "Asset pricing with multiplicative habit and power-expo preferences," Economics Letters, Elsevier, vol. 94(3), pages 319-325, March.
    7. Stefano d’Addona & Christos Giannikos, 2014. "Asset pricing and the role of macroeconomic volatility," Annals of Finance, Springer, vol. 10(2), pages 197-215, May.

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