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Title: Multifactor consumption based asset pricing models using the US stock market as a reference: Evidence from a panel of developed economies
Authors: Hunter, J
Wu, F
Keywords: Consumption based asset pricing model;Multi-factor model;Panel estimation;Fixed effects
Issue Date: 2014
Publisher: Elsevier
Citation: Economic Modelling, 36, 557–565, 2014
Abstract: In this paper we extend the time series analysis to the panel framework to test the C-CAPM driven by wealth references for developed countries. Speci cally, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error com- ponents. The empirical findings of this two-factor model with various specifications all indicate that there is significant unobserved heterogeneity captured by cross-country fixed e¤ects when consumption growth is treated as a common factor, of which the average risk aversion coefficient is 4.285. However, the cross-sectional impact of home consumption growth varies dramatically over the countries, where unobserved heterogeneity of risk aversion can also be addressed by random effects.
Description: This article was submitted and presented at the European Economics and Finance Society Conference, 2012, at Koç University, Istanbul, and the final version was published in a Special Section of Economic Modelling. The special section editor was John Hunter from Brunel University London.
ISSN: 0264-9993
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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