Keeping up with the Joneses: An international asset pricing model

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Gómez, Juan-Pedro; Priestly, Richard; Zapatero, Fernando. Keeping up with the Joneses: An international asset pricing model. 2003
To cite or link this document: Gómez, Juan-Pedro Priestly, Richard Zapatero, Fernando
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2003-06-01
dc.description.abstract We derive an international asset pricing model that assumes local investors have preferences of the type "keeping up with the Joneses." In an international setting investors compare their current wealth with that of their peers who live in the same country. In the process of inferring the country's average wealth, investors incorporate information from the domestic market portfolio. In equilibrium, this gives rise to a multifactor CAPM where, together with the world market price of risk, there exists country-speciffic prices of risk associated with deviations from the country's average wealth level. The model performs signifficantly better, in terms of explaining cross-section of returns, than the international CAPM. Moreover, the results are robust, both for conditional and unconditional tests, to the inclusion of currency risk, macroeconomic sources of risk and the Fama and French HML factor.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 694
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Keeping up with the Joneses: An international asset pricing model
dc.type info:eu-repo/semantics/workingPaper 2016-06-04T02:50:41Z
dc.subject.keyword Finance and Accounting
dc.subject.keyword consumption externalities
dc.subject.keyword multifactor asset pricing model
dc.rights.accessRights info:eu-repo/semantics/openAccess

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