Evaluating stochastic discount factors from term structure models
AbstractThis paper examines the feasibility of applying the stochastic discount factor methodology to fixed-income data using modern term structure models. Using this approach the researcher can examine returns on bond portfolios whose exact composition is unknown, as is often the case. This paper proposes an observable proxy for the SDF from continuous-time models and documents via Monte Carlo methods the properties of the GMM estimator based on using this proxy.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 16 (2009)
Issue (Month): 5 (December)
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Web page: http://www.elsevier.com/locate/jempfin
Stochastic discount factors Term structure models Monte Carlo method GMM estimator;
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