An International Dynamic Asset Pricing Model

43 Pages Posted: 11 Aug 1999 Last revised: 12 Oct 2010

See all articles by Robert J. Hodrick

Robert J. Hodrick

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

David T. Ng

Johnson College of Business

Paul Sengmueller

Tilburg University

Date Written: June 1999

Abstract

We examine the ability of a dynamic asset-pricing model to explain the returns on G7-country stock market indices. We extend Campbell's (1996) asset-pricing model to investigate international equity returns. We also utilize and evaluate recent evidence on the predictability of stock returns. We find some evidence for the role of hedging demands in explaining stock returns and compare the predictions of the dynamic model to those from the static CAPM. Both models fail in their predictions of average returns on portfolios of high book-to-market stocks across countries.

Suggested Citation

Hodrick, Robert J. and Ng, David T. and Sengmueller, Paul F., An International Dynamic Asset Pricing Model (June 1999). NBER Working Paper No. w7157. Available at SSRN: https://ssrn.com/abstract=171570

Robert J. Hodrick (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
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David T. Ng

Johnson College of Business ( email )

301G Warren Hall, Cornell University
Ithaca, NY 14850-1967
United States
6072550145 (Phone)

Paul F. Sengmueller

Tilburg University ( email )

Department of Finance
Warandelaan 2
Tilburg, 5037 AB
Netherlands
+31 13 466 2318 (Phone)

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