IDEAS home Printed from https://ideas.repec.org/a/ijf/ijfiec/v3y1998i4p291-302.html
   My bibliography  Save this article

Evaluating the Consumption-Capital Asset Pricing Model Using Hansen-Jagannathan Bounds: Evidence from the UK

Author

Listed:
  • Engsted, Tom

Abstract

The consumption based capital asset pricing model is evaluated using Hansen and Jagannathan (1991) bounds and 68 years of annual UK data. In contrast to the standard statistical methodology, the Hansen-Jagannathan methodology is fully non-parametric and based on only one principle from economic theory, namely the Law of One Price. From this principle feasible regions for mean-standard deviation pairs of stochastic discount factors can be derived using asset returns data. The empirical results show that if agents are very risk-averse, a simple time-separable power utility version of the C-CAPM does generate a stochastic discount factor with mean and standard deviation inside the feasible region. The UK data also display the equity premium and risk-free rate puzzles, although to a lesser extent than has been documented for the USA. Copyright @ 1998 by John Wiley & Sons, Ltd. All rights reserved.

Suggested Citation

  • 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.
  • Handle: RePEc:ijf:ijfiec:v:3:y:1998:i:4:p:291-302
    as

    Download full text from publisher

    File URL: http://www3.interscience.wiley.com/cgi-bin/jtoc?ID=15416
    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.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stuart Hyde & Keith Cuthbertson & Dirk Nitzsche, 2005. "Resuscitating the C-CAPM: empirical evidence from France and Germany," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 337-357.
    2. Michelle L. Barnes & Anthony W. Hughes, 2002. "A quantile regression analysis of the cross section of stock market returns," Working Papers 02-2, Federal Reserve Bank of Boston.
    3. Engsted, Tom, 2002. " Measures of Fit for Rational Expectations Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 301-355, July.
    4. Stuart Hyde & Mohamed Sherif, 2004. "Don't break the habit: structural stability tests of consumption models in the UK," Money Macro and Finance (MMF) Research Group Conference 2003 49, Money Macro and Finance Research Group.

    More about this item

    Statistics

    Access and download statistics

    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:ijf:ijfiec:v:3:y:1998:i:4:p:291-302. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.