Return predictability and state variables in consumption-based CAPMs: International perspectives

International Research Journal of Finance and Economics

Volumn 51, Issue , 2010, Pages 132-161

  Li, Bin ^a   Liu, Benjamin ^a  

^a GRIFFITH UNIVERSITY   (Australia)

Author keywords

Asset pricing; Consumption based CAPM; Consumption wealth ratio; Habit formation; Predictability

Indexed keywords

EID: 77958130525     PISSN: 14502887     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (27)

1. Abel, A.B., 1990. "Asset prices under habit formation and catching up with the Joneses", American Economic Review Papers and Proceedings 80, pp.38-42.
2. Breeden, D., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities", Journal of Financial Economics 7, pp.265-296.
3. Breeden, Douglas T., Michael R. Gibbons, and Robert H. Litzenberger, 1989. "Empirical tests of the consumption-based CAPM", Journal of Finance 44, pp.231-262.
4. Campbell, John Y., and John H. Cochrane, 1999. "By force of habit: a consumption-based explanation of aggregate stock market behavior", Journal of Political Economy 107, pp.205-251.
5. Campbell, John Y., Andrew W Lo and A. Craig MacKinlay, 1997. "The Econometrics of Financial Markets", Princeton University Press, Princeton, NJ.
6. Campbell, John Y., and Gregory Mankiw, 1989. "Consumption, income and interest rates: Reinterpreting the time series evidence"; in Olivier J. Blanchard and Stanley Fischer, eds.: NBER Macroeconomics Annual, MIT Press, Cambridge, MA.
7. Dickey, D., and W.A. Fuller, 1979. "Distribution of the estimators for time series regressions with a unit root", Journal of the American Statistical Association 74, pp.427-431.
8. Hansen, Lars Peter, and Kenneth J. Singleton, 1982. "Generalized instrumental variables estimation of nonlinear rational expectations models", Econometrica 50, pp.1269-1288.
9. Harvey, Campbell R., 1989. "Time-varying conditional covariance in tests of asset pricing models", Journal of Financial Economics 24, pp.289-317.
10. Johansen, Soren, 1988. "Statistical analysis of cointegrating vectors", Journal of Economic Dynamics and Control 12, pp.231-254.
11. Johansen, Soren, 1991. "Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models", Econometrica 59, pp.1551-1580.
12. Lettau, Martin, and Sydney Ludvigson, 2001a. "Consumption, aggregate wealth, and expected stock returns", The Journal of Finance 56, pp.815-849.
13. Lettau, Martin, and Sydney Ludvigson, 2001b. "Resurrecting the (C)CAPM: a cross-sectional test when risk premia are time varying", Journal of Political Economy 109, pp.1238-1287.
14. Li, Bin, 2010. "Predictability of stock returns and consumption-based CAPM: Evidence from a small open market", European Journal of Economics, Finance and Administrative Sciences, forthcoming.
15. Li, Yuming, 2001. "Expected returns and habit persistence", Review of Financial Studies 14, pp.861-899.
16. Li, Yuming, 2005. "The Wealth-consumption ratio and the consumption-habit ratio", Journal of Business & Economic Statistics 23, pp.226-241.
17. Li, Yuming, and Maosen Zhong, 2005. "Consumption habit and international stock returns", Journal of Banking & Finance 29, pp.579-601.
18. Li, Yuming, Weili Lu, and Maosen Zhong, 2004. "The predictability of industry portfolio returns", the University of Queensland working paper.
19. Lucas, Robert E., 1978. "Asset prices in an exchange economy", Econometrica 76, pp.1429-1445.
20. Mankiw, N. Gregory, and Matthew D. Shapiro, 1986. "Risk and return: Consumption versus market beta", Review of Economics and Statistics 68, pp.452-459.
21. Newey, Whitney K., and Kenneth D. West, 1987. "A simple, positive semidefinite, heteroscedasticity and autocorrelation consistent covariance matrix", Econometrica 55, pp.703-708.
22. Phillips, P.C.B., and P. Perron, 1988. "Testing for a unit root in time series regressions", Biometrika 65, pp.335-346.
23. Phillips, Peter, and Sam Ouliaris, 1990. "Asymptotic properties of residual based tests for cointegration", Econometrica 58, pp.165-193.
24. Rubinstein, Mark, 1976. "The valuation of uncertain income streams and the pricing of options", Bell Journal of economics and Management Science 7, pp.407-425.
25. Stock, James H., and Mark Watson, 1993. "A simple estimator of cointegrating vectors in higher order integrated systems", Econometrica 6, pp.783-820.
26. Tan, Alvkin, and Graham Voss, 2003. "Consumption and wealth in Australia", The Economic Record 79, pp.39-56.
27. Wheatley, Simon, 1988. "Some tests of international equity integration", Journal of Financial Economics 21, pp.177-212.