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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|
|Keywords:||Consumption-CAPM;Excess returns;Generated regressor;GMM;Habits;Panel;Wealth reference|
|Citation:||Economics and Finance Working Paper, Brunel University, 10-17|
|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. Specifically, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error components. The empirical ndings 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.|
|Appears in Collections:||Economics and Finance|
Dept of Economics and Finance Research Papers
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