IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v52y1997i4p1383-1410.html
   My bibliography  Save this article

Approximating the Asset Pricing Kernel

Author

Listed:
  • Chapman, David A

Abstract

This article tests a simple consumption-based asset pricing model by approximating the true asset pricing kernel using low-order orthonormal polynomials based on the model's state variables. Approximated kernels based solely on next period's consumption growth are not rejected by overall measures of model fit but they produce statistically and economically large pricing errors. Approximated kernels based on two quarters of future consumption growth and technology shocks have substantially improved overall fit. In particular, the best of these kernels are capable of eliminating the small firm effect. Copyright 1997 by American Finance Association.

Suggested Citation

  • Chapman, David A, 1997. " Approximating the Asset Pricing Kernel," Journal of Finance, American Finance Association, vol. 52(4), pages 1383-1410, September.
  • Handle: RePEc:bla:jfinan:v:52:y:1997:i:4:p:1383-1410
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28199709%2952%3A4%3C1383%3AATAPK%3E2.0.CO%3B2-G&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Anderson, Robert E., 1994. "Voucher funds in transitional economies : the Czech and Slovak experience," Policy Research Working Paper Series 1324, The World Bank.
    2. Cable, John R, 1985. "Capital Market Information and Industrial Performance: The Role of West German Banks," Economic Journal, Royal Economic Society, vol. 95(377), pages 118-132, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    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:bla:jfinan:v:52:y:1997:i:4:p:1383-1410. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.