The GEL estimates resolve the risk-free rate puzzle in Japan
AbstractWe show the nonexistence of the well-known risk-free rate puzzle in the Japanese financial markets. This result crucially depends on the accurate estimates of the two basic parameters: the subjective discount factor and the degree of risk aversion, appearing in the standard Consumption-based Capital Asset Pricing Model (CCAPM). We estimate these parameters by the recently developed method, Generalized Empirical Likelihood (GEL) estimation; we also confirm our results by comparing Mean Squared Errors (MSEs) based on higher order biases and first order asymptotic variances of the estimates.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 22 (2012)
Issue (Month): 5 (March)
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Web page: http://www.tandfonline.com/RAFE20
Other versions of this item:
- Mikio Ito & Akihiko Noda, 2010. "The GEL Estimates Resolve the Risk-free Rate Puzzle in Japan," Keio/Kyoto Joint Global COE Discussion Paper Series 2010-007, Keio/Kyoto Joint Global COE Program.
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