Asset pricing with a reference level of consumption: New evidence from the cross-section of stock returns |
| |
Authors: | Joachim Grammig Andreas Schrimpf |
| |
Institution: | a University of Tübingen, Germany b Centre for Financial Research (CFR), Cologne, Germany c Department of International Finance and Financial Management, Centre for European Economic Research (ZEW), L7 1, 68161 Mannheim, Germany |
| |
Abstract: | This paper presents an empirical evaluation of recently proposed asset pricing models which extend the standard preference specification by a reference level of consumption. We motivate an alternative model that accounts for the return on human capital as a determinant of the reference level. Our analysis is based on a broad cross-section of test assets, which provides a level playing field for a comparison to established benchmark models. The reference level model extended by human capital does a good job in explaining size and value premia. Estimated on Fama and French's size and book-to-market sorted portfolios, it outperforms Lettau and Ludvigson's scaled CCAPM and delivers average pricing errors comparable to the Fama-French three-factor model. |
| |
Keywords: | G12 |
本文献已被 ScienceDirect 等数据库收录! |
|