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 InfoPaper provided by Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2010-007.
Length: 16 pages
Date of creation: 2010
Date of revision:
Other versions of this item:
- Mikio Ito & Akihiko Noda, 2012. "The GEL estimates resolve the risk-free rate puzzle in Japan," Applied Financial Economics, Taylor and Francis Journals, vol. 22(5), pages 365-374, March.
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