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Title: | Multifactor consumption based asset pricing model of the UK stock market: The US stock market as a wealth reference |
Authors: | Hunter, J Wu, F |
Keywords: | Consumption-CAPM;Excess returns;Generated regressor;GMM;Habits;Wealth reference |
Issue Date: | 2011 |
Publisher: | University of Birmingham |
Citation: | Money Macro Finance Annual Conference, University of Birmingham, 15 - 17 Sep 2011 |
Abstract: | Here a multifactor model of UK stock returns is developed, replac- ingHere a multifactor model of UK stock returns is developed, replacing the conventional consumption habit reference by a relation that depends on US wealth. Two step Instrumental Variables and Generalized Method of Moments estimators are applied to reduce the impact of weak instruments. The standard errors are corrected for the generated regressor problem and the model is found to explain UK excess returns by UK consumption growth and expected US excess returns. Hence, controlling for nominal effects by subtracting a risk free rate and conditioning on real US excess returns provides an appealing explanation of the equity premium puzzle. US excess returns. Hence, controlling for nominal e¤ects by subtracting a risk free rate and conditioning on real US excess returns provides an appealing explanation of the equity premium puzzle. |
Description: | Copyright @ 2011 University of Birmingham |
URI: | http://www.birmingham.ac.uk/schools/business/departments/Accounting-Finance/events/43rd-papers.aspx http://bura.brunel.ac.uk/handle/2438/6308 |
Appears in Collections: | Economics and Finance Publications Dept of Economics and Finance Research Papers |
Files in This Item:
File | Description | Size | Format | |
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11-C-CAPM-ni.pdf | 146.6 kB | Adobe PDF | View/Open |
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