Multicountry Comparisons of the Consumption Based Capital Asset Pricing Model: Germany, Japan, and U.S.A.

Posted: 7 Sep 1999

See all articles by Amlan Roy

Amlan Roy

Queen Mary, University of London - Department of Economics

Date Written: July 1994

Abstract

Using a newly constructed data-set from original sources, Consumption Based Capital Asset Pricing Model (CCAPM) tests across developed nations (Japan, USA and Germany) in three continents (Asia, America, Europe) reveal very similar results on model performance. The study uses quarterly data over a longer time span than previous studies. The results and test procedure are consistent with those in an earlier study over a shorter period by Hansen- Singleton (1982). The parameter estimates of the discount factor and the coefficient of relative risk-aversion are strikingly similar across the three countries. The study finds the existence of an equity-premium. Moreover the fact that the equity- premium remains unexplained by CCAPM i.e; a puzzle, is another interesting finding. The study finds no stronger support in Japan for the model than in the US as claimed in a paper by Hamori (1992). This is consistent with the view that a combination of frictions and different utility specifications may be more consistent with international evidence. Higher order moments and other aspects of consumption data in these countries are also being studied in further work.

JEL Classification: C13, C32, G12, E21

Suggested Citation

Roy, Amlan, Multicountry Comparisons of the Consumption Based Capital Asset Pricing Model: Germany, Japan, and U.S.A. (July 1994). Available at SSRN: https://ssrn.com/abstract=5824

Amlan Roy (Contact Author)

Queen Mary, University of London - Department of Economics ( email )

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London, E1 4NS
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44 171 975 5085 (Phone)
44 181 983 3580 (Fax)

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