CIRJE-F-428 | "The Spirit of Capitalism and Asset Pricing: an Empirical Investigation" |
Author Name | Zhang, Qiang |
Date | June 2006 |
Full Paper | PDF file@ |
Remarks | Subsequently published in The B.E. Journal of Macroeconomics (Topics in Macroeconomics), 2006, Vol. 6, Issue 3, Article 1, 1-23. |
Abstract |
We extend and test two models of aggregate asset pricing that feature status-seeking through
accumulation of not only financial assets but also human capital. We use weak-identification
robust tests to confront these models with U.S. data. Contrary to previous results, we find that the
spirit of capitalism hypothesis, modeled as either direct preference for wealth or pursuit of
relative wealth status, is rejected in the aggregate data. Therefore, adding status motive alone to
an otherwise standard model may not be sufficient to resolve the equity premium puzzle.
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