An International Dynamic Asset Pricing Model
Coauthor(s): David Ng, Paul Sengmueller.
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.
Source: International Tax and Public Finance
Hodrick, Robert, David Ng, and Paul Sengmueller. "An International Dynamic Asset Pricing Model." International Tax and Public Finance 6, no. 4 (June 1999): 597-620.