TY  - JOUR
AU  - Engel,Charles
TI  - Tests of CAPM on an International Portfolio of Bonds and Stocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4598
PY  - 1993
Y2  - December 1993
UR  - http://www.nber.org/papers/w4598
L1  - http://www.nber.org/papers/w4598.pdf
N1  - Author contact info:
Charles Engel
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706-1393
Tel: 608/262-3697
Fax: 608/262-2033
E-Mail: cengel@ssc.wisc.edu
M1  - published as Charles M. Engel. "Tests of CAPM on an International Portfolio of Bonds and Stocks," in Jeffrey A. Frankel, editor, "The Internationalization of Equity Markets " University of Chicago Press (1994)

AB  - This paper estimates and tests an international version of the Capital Asset Pricing Model.  Investors from the U.S., Germany and Japan choose a portfolio that includes bonds and equities from each of these countries to maximize a function of the mean and variance of returns.  Investors in each country evaluate returns in terms of their home currency.  The CAPM does have some power in explaining ex ante returns.  It predicts fairly large risk premia on the equities, but small ones on bonds.  The model is rejected, however, when tested against a more general alternative that allows for more investor heterogeneity than the CAPM.
ER  -