Using the parametric Generalized Method of Moments (GMM) methodology of Hansen (198220. Hansen , LP . 1982 . Large sample properties of generalized method of moments estimators . Econometrica , 50 : 1029 � 54 .
[CrossRef], [Web of Science ®] View all references) and the nonparametric approach of Hansen and Jagannathan (199121. Hansen , LP and Jagannathan , R . 1991 . Implications of security market data for models of dynamic economies . Journal of Political Economy , 99 : 225 � 62 .
[CrossRef], [Web of Science ®] View all references), this note investigates the ability of Consumption-based Asset Pricing Models (CCAPMs) to explain the cross-section of investment funds returns in the German market. The parametric analysis shows that both the classic power utility model of Hansen and Singleton (198223. Hansen , LP and Singleton , KJ . 1982 . Generalized instrumental variables estimation of nonlinear rational expectations models . Econometrica , 50 : 1269 � 86 .
[CrossRef], [Web of Science ®] View all references) and the habit formation extension of Campbell and Cochrane (19996. Campbell , JY and Cochrane , JH . 1999 . By force of habit: a consumption-based explanation of aggregate stock market behavior . Journal of Political Economy , 107 : 205 � 51 .
[CrossRef], [Web of Science ®] View all references) are not rejected, but require high risk-aversion to be consistent with the data. Furthermore, only the power utility model suffers from a risk-free rate puzzle. The nonparametric results are not accompanied by a risk-free rate puzzle for both models but the models still show high risk aversion. So using adequate test assets and evaluation methods, this note fully supports Cochrane (200610. Cochrane , JH . 2006 . � Financial markets and the real economy � . In Financial Markets and the Real Economy , Edited by: Cochrane , JH . XI � LXIX . London : Edward Elgar .
View all references) saying that work explaining asset returns with consumption-based models should be dying out since there are preferences that can coherently describe the data with high risk-aversion.
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