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Assessing misspecified asset pricing models with empirical likelihood estimators

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  • Almeida, Caio
  • Garcia, René

Abstract

Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of admissible stochastic discount factors. We extend their fundamental contribution by considering Minimum Discrepancy projections where misspecification is measured by a family of convex functions that take into account higher moments of asset returns. The Minimum Discrepancy problems are solved on dual spaces producing a family of estimators that captures the least-square problem as a particular case. We derive the asymptotic distributions of the estimators for the Cressie–Read family of discrepancies, and illustrate their use with an assessment of the Consumption Asset Pricing Model.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 170 (2012)
Issue (Month): 2 ()
Pages: 519-537

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Handle: RePEc:eee:econom:v:170:y:2012:i:2:p:519-537

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Web page: http://www.elsevier.com/locate/jeconom

Related research

Keywords: Stochastic discount factor; Euler equations; Generalized minimum contrast estimators; Model misspecification; Cressie–Read discrepancies;

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References

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Citations

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Cited by:
  1. Nikolay Gospodinov & Raymond Kan & Cesare Robotti, 2011. "Chi-squared tests for evaluation and comparison of asset pricing models," Working Paper 2011-08, Federal Reserve Bank of Atlanta.
  2. Seojeong Lee, 2014. "Asymptotic Refinements of a Misspecification-Robust Bootstrap for GEL Estimators," Discussion Papers 2014-02, School of Economics, The University of New South Wales.
  3. Fletcher, Jonathan, 2014. "Benchmark models of expected returns in U.K. portfolio performance: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 30-46.
  4. Gagliardini, Patrick & Ronchetti, Diego, 2013. "Semi-parametric estimation of American option prices," Journal of Econometrics, Elsevier, vol. 173(1), pages 57-82.

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