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Assessing misspecified asset pricing models with empirical likelihood estimators

  • Almeida, Caio
  • Garcia, René

Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of admissible stochastic discount factors. We extend their fundamental contribution by considering Minimum Discrepancy projections where misspecification is measured by a family of convex functions that take into account higher moments of asset returns. The Minimum Discrepancy problems are solved on dual spaces producing a family of estimators that captures the least-square problem as a particular case. We derive the asymptotic distributions of the estimators for the Cressie–Read family of discrepancies, and illustrate their use with an assessment of the Consumption Asset Pricing Model.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 170 (2012)
Issue (Month): 2 ()
Pages: 519-537

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Handle: RePEc:eee:econom:v:170:y:2012:i:2:p:519-537
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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