Loss aversion asset pricing model performance: empirical evidence from five pacific-basin countries

David Ng and Mehdi Sadeghi

A chapter in Asia Pacific Financial Markets in Comparative Perspective: Issues and Implications for the 21st Century, 2005, pp 235-271 from Emerald Group Publishing Limited

Abstract: This paper studies the empirical application of an asset pricing model derived from the irrational individual behavior of loss aversion. Previous research using loss aversion asset pricing finds conclusive evidence that estimations match market equity premium and volatility using simulation data. We find that within its empirical application, the estimated errors are comparable to errors estimated from the capital asset pricing model. This study of the correlations between rational and irrational asset pricing model from the empirical results finds validity for both estimated values. Finally, we see the importance of cultures, economic development and financial development on asset pricing through an empirical examination of five pacific-basin countries in the estimation of asset pricing models.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:eme:csefzz:s1569-3759(05)86012-7

DOI: 10.1016/S1569-3759(05)86012-7

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