IDEAS home Printed from https://ideas.repec.org/a/ids/ijecbr/v7y2014i1p72-103.html
   My bibliography  Save this article

Household consumption smoothing through equity investment in the USA and Japan: an empirical examination of the consumption-capital asset pricing model (C-CAPM)

Author

Listed:
  • Kusdhianto Setiawan

Abstract

The C-CAPM is examined-based on a constant relative risk aversion utility function. The subjective discount rate (beta) and coefficient of risk aversion (gamma) are estimated by recursive generalised method of moments estimation over the 1987:12-2010:7 period for the USA and Japan. In contrast with previous empirical research, the findings show that the C-CAPM fits well for both countries yet for different time periods (1987:12-1996:11 and 1987:12-2001:1 for the USA and Japan respectively). However, during the sample period, the gamma coefficient estimated for the USA was high (above eight) compared with that for Japan (around one). I also find that there is no relationship between USA stock market returns and Japanese household consumption. Parameter stability tests are also performed for the model estimated using the full sample and breakpoints were found in the models.

Suggested Citation

  • Kusdhianto Setiawan, 2014. "Household consumption smoothing through equity investment in the USA and Japan: an empirical examination of the consumption-capital asset pricing model (C-CAPM)," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 7(1), pages 72-103.
    • Handle: RePEc:ids:ijecbr:v:7:y:2014:i:1:p:72-103
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=57955
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijecbr:v:7:y:2014:i:1:p:72-103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=310 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.