IDEAS home Printed from https://ideas.repec.org/p/uia/iowaec/93-10.html
   My bibliography  Save this paper

Testing the Consumption CAPM with Heavy-Tailed Pricing Errors

Author

Listed:
  • Kocherlakota, N.R.

Abstract

Many tests have rejected the implications of the consumption CAPM for data on U.S. asset returns. All of the tests, though, assume that the pricing errors satisfy the Central Limit Theorem. I provide empirical evidence that the marginal distributions of the pricing errors are so heavy-tailed that they do not satisfy the Central Limit Theorem. Using recent work on jackknifing, I construct a method of testing asset pricing models with heavy-tailed errors. Using this procedure, I find that the consumption CAPM is not rejected by annual U.S. data.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Kocherlakota, N.R., 1993. "Testing the Consumption CAPM with Heavy-Tailed Pricing Errors," Working Papers 93-10, University of Iowa, Department of Economics.
    • Handle: RePEc:uia:iowaec:93-10
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alexis Akira Toda & Kieran James Walsh, 2017. "Fat tails and spurious estimation of consumption‐based asset pricing models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(6), pages 1156-1177, September.
    2. Laurian Lungu & Patrick Minford, 2006. "Explaining The Equity Risk Premium," Manchester School, University of Manchester, vol. 74(6), pages 670-700, December.
    3. Toda, Alexis Akira, 2014. "Incomplete market dynamics and cross-sectional distributions," Journal of Economic Theory, Elsevier, vol. 154(C), pages 310-348.
    4. Alexis Akira Toda & Kieran Walsh, 2015. "The Double Power Law in Consumption and Implications for Testing Euler Equations," Journal of Political Economy, University of Chicago Press, vol. 123(5), pages 1177-1200.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uia:iowaec:93-10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: None (email available below). General contact details of provider: https://edirc.repec.org/data/deuiaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.