Premium
Catching up with the Americans
Author(s) -
Smoluk H.J,
VanderLinden David
Publication year - 2003
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2003.09.003
Subject(s) - keeping up with the joneses , economics , capital asset pricing model , consumption (sociology) , marginal utility , financial economics , per capita , time preference , equity (law) , preference , monetary economics , econometrics , microeconomics , growth model , social science , population , demography , sociology , political science , law
This paper develops an international version of the consumption‐based capital asset pricing (CCAPM), which we refer to as “catching up with the Americans.” Previous CCAPM research develops the concept of “catching up with the Joneses,” where a representative economic agent exhibits higher marginal utility of consumption as a result of higher past per capita consumption in his own country. Catching up with the Americans, on the other hand, is an international habit‐preference hypothesis. It extends the idea of catching up with the Joneses by stating that consumers of non‐U.S. countries gain higher marginal utility of consumption as a result of higher past American consumption growth. Contrary to much of the CCAPM literature, we test this version of the model using long bond rates rather than equity returns. However, like most of the previous research on the CCAPM, the catching up with the Americans model fails to explain the relationship between consumption and asset returns.