Scandinavian Working Papers in Business Administration
Finance Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No 04-2: Estimating the Consumption-Capital Asset Pricing Model without Consumption Data: Evidence from Denmark
Anne-Sofie Reng Rasmussen ()
Additional contact information
Anne-Sofie Reng Rasmussen: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark
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
50 pages, May 27, 2004
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