Please use this identifier to cite or link to this item: http://buratest.brunel.ac.uk/handle/2438/6308
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

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