IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Exploring the Role of Money in Asset Pricing in Japan: Monetary Considerations and Stochastic Discount Factors

Listed author(s):
  • Baba, Naohiko

    (Institute for Monetary & Econ Studies, Bank of Japan)

Registered author(s):

    As emphasized by Giovannini and Labadie (1991), empirical regularities involving nominal interest rates, asset prices, and inflation should be ultimately determined by money. The role of money, however, is almost neglected, particularly in terms of asset-pricing literature. This paper attempts to investigate the role of money in asset pricing in Japan. Specifically, it compares the empirical performance of stochastic discount factors derived from (i) the standard C-CAPM, (ii) the habit formation model, (iii) the money-in-the-utility model, and (iv) the cash-in-advance model. Empirical results show that in terms of the underlying parameters estimated by Hansen's (1982) Generalized Method of Moments (GMM), the habit formation and the cash-in-advance models are almost always rejected, although no significant difference is found in terms of the volatility bound test among models. The specification test between the standard C-CAPM and the money-in-the-utility model generally favors the latter, implying that there is a positive role of money in specifying the stochastic discount factor.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

    Volume (Year): 18 (2000)
    Issue (Month): 2 (December)
    Pages: 159-198

    in new window

    Handle: RePEc:ime:imemes:v:18:y:2000:i:2:p:159-198
    Contact details of provider: Postal:
    2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103

    Phone: +81-3-3279-111
    Fax: +81-3-3510-1265
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:18:y:2000:i:2:p:159-198. 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: (Kinken)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.