Saving, Human Wealth, and Asset Pricing Nexus : The World Evidence

The present study examines the dynamics of saving, human wealth, and asset pricing nexus across developed and emerging economies. We introduce two equilibrium asset pricing models in an intertemporal capital asset pricing framework, including the priced factors, human wealth, and market portfolio in the first framework and the saving and market portfolio in the second framework. Both the asset pricing frameworks consist of two-factor, four-factor, and five-factor asset pricing models. We control size and value factors in the four-factor model and size, value, and momentum factors in the five-factor model. The IV-GMM estimation and GRS test results indicate that human wealth and market portfolio for the first framework and saving and market portfolio in the second framework are primary priced factors in explaining the average returns for developed economies and aggregate level. On the contrary, both frameworks fail to yield significant results explaining the average returns for emerging economies