Multifactor consumption based asset pricing models using the US stock market as a reference: Evidence from a panel of developed economies

John Hunter () and Feng Wu

Economic Modelling, 2014, vol. 36, issue C, 557-565

Abstract: This article considers a panel framework to test consumption based asset pricing models driven by a US stock market reference for a number of developed economies. Specifically, we focus on a linearized form of what might be seen as a consumption-based capital asset pricing model in a pooled cross section panel with two-way error components. The empirical findings of this multifactor model using a range of specifications indicate that there is a significant unobserved heterogeneity captured by cross-country fixed effects when consumption growth is treated as a common factor. However, the cross-sectional impact of home consumption growth can vary over the countries, where unobserved heterogeneity in the rate of risk aversion can also be addressed by random effects.

Keywords: Consumption based asset pricing model; Multi-factor model; Panel estimation; Fixed effects (search for similar items in EconPapers)
JEL-codes: C52 E44 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:557-565

DOI: 10.1016/j.econmod.2013.10.001

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