Finance Working Papers, Department of Business Studies, Aarhus School of Business, University of Aarhus
No 04-2:
Estimating the Consumption-Capital Asset Pricing Model without Consumption Data: Evidence from Denmark
Anne-Sofie Reng Rasmussen ()
Abstract: This paper evaluates the ability of the multifactor model
of Campbell
(1993, 1996) to explain time-series and cross-sectional
patterns of
Danish stock and bond returns. The model is obtained by
substituting
consumption out of the intertemporal budget constraint of
the representative
agent in the traditional consumption-based capital
asset pricing
model (C-CAPM). This enables the model to be estimated
without the
use of consumption data. Estimation of the model results in
reasonable
preference parameter estimates. Unlike previous research
based on this
model, the restrictions implied by both the conditional
and unconditional
model are generally not rejected, and Hansen and
Jagannathan’s (1997)
specification error measures generally imply small
pricing errors.
Keywords: Intertemporal asset pricing; VAR model; Hansen-Jagannathan specification error; (follow links to similar papers)
50 pages, May 27, 2004
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