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Can consumption-based asset pricing models using monetary conditioning variables explain the cross-section of German stock returns?

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  • Benjamin R. Auer

Abstract

In this article, we analyse whether simple Consumption-based Capital Asset Pricing Models (CCAPMs) using monetary conditioning information (growth of the money aggregates M1, M2 and M3) can explain the cross-section of German size, book-to-market and industry portfolio returns. Our results show that models having stochastic discount factor parameters that vary with money aggregates can reduce the pricing errors of models with constant parameters. However, a large proportion of the cross-sectional variation remains unexplained.

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  • Benjamin R. Auer, 2013. "Can consumption-based asset pricing models using monetary conditioning variables explain the cross-section of German stock returns?," Applied Economics, Taylor & Francis Journals, vol. 45(25), pages 3564-3573, September.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:25:p:3564-3573
    DOI: 10.1080/00036846.2012.725935
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    1. Peter S. Schmidt & Andreas Schrimpf & Urs von Arx & Alexander F. Wagner & Andreas Ziegler, 2011. "On the Construction of Common Size, Value and Momentum Factors in International Stock Markets: A Guide with Applications," CER-ETH Economics working paper series 11/141, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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