NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An International Dynamic Asset Pricing Model

Robert J. Hodrick, David Tat-Chee Ng, Paul Sengmueller

NBER Working Paper No. 7157
Issued in June 1999
NBER Program(s):   AP   IFM

We examine the ability of a dynamic asset-pricing model to explain the returns on G7-country stock market indices. We extend Campbell's (1996) asset-pricing model to investigate international equity returns. We also utilize and evaluate recent evidence on the predictability of stock returns. We find some evidence for the role of hedging demands in explaining stock returns and compare the predictions of the dynamic model to those from the static CAPM. Both models fail in their predictions of average returns on portfolios of high book-to-market stocks across countries.

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Document Object Identifier (DOI): 10.3386/w7157

Published: International Tax and Public Finance, Vol. 6, no. 4 (November 1999): 597-620

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