Comparing Consumption-based Asset Pricing Models: Evidence from Brazil

Flávio Alberti Docha () and Carlos Enrique Carrasco-Gutierrez
Additional contact information
Flávio Alberti Docha: Graduate Program in Economics, Catholic University of Brasilia (PPGE/UCB), Brasilia, DF, Brazil. QS 07 – Lote 01 – EPCT – Brasília/DF - CEP
Carlos Enrique Carrasco-Gutierrez: Graduate Program in Economics, Catholic University of Brasilia (PPGE/UCB) and Graduate Program in Public Policy, Catholic University of Brasilia (MPPP/UCB), Brasilia, DF, Brazil

Annals of Financial Economics (AFE), 2025, vol. 20, issue 01, 1-33

Abstract: This study offers a novel contribution by systematically comparing five consumption-based asset pricing models using both conditional and unconditional Hansen–Jagannathan distances applied to Brazilian market data. In addition to the traditional CRRA, habit formation and recursive Epstein–Zin preferences, we incorporate alternative specifications such as the saving-CAPM and preferences with labor income, rarely explored in Brazilian empirical finance studies. We estimate the structural parameters of each model and formally evaluate their performance through these distance metrics. Our findings reveal that the recursive utility model provides the best empirical fit among the alternatives considered. Furthermore, we find no evidence of the equity premium puzzle in Brazil throughout the analyzed period. These results contribute to the literature by offering new insights into asset pricing dynamics in emerging markets.

Keywords: Consumption-based asset pricing model; recursive utility; Hansen–Jagannathan distance; model comparison (search for similar items in EconPapers)
JEL-codes: C32 E20 E21 G12 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S201049522550006X
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:20:y:2025:i:01:n:s201049522550006x

Ordering information: This journal article can be ordered from

DOI: 10.1142/S201049522550006X

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().