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On a Simple Econometric Approach for Utility-Based Asset Pricing Model

Author

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  • Cheng-Few Lee
  • Jack C. Lee
  • H.F. Ni
  • C.C. Wu

Abstract

The Journal of Finance has published an important paper entitled "A Simple Econometric Approach for Utility-Based Asset Pricing Model" by Brown and Gibbon (1985). The main purpose of this paper is to extend the research of Brown and Gibbons (1985) and Karson, Cheng and Lee (1995) in estimating the relative risk aversion (RRA) parameter β in utility-based asset pricing model. First, we review the distributions of RRA parameter estimate \hat\beta . Then, a new method to the distribution of \hat{\beta} is derived, and a Bayesian approach for the inference of β is proposed. Finally, empirical results are presented by using market rate of return and riskless rate data during the period December 1925 through December 2001.

Suggested Citation

  • Cheng-Few Lee & Jack C. Lee & H.F. Ni & C.C. Wu, 2004. "On a Simple Econometric Approach for Utility-Based Asset Pricing Model," Review of Quantitative Finance and Accounting, Springer, vol. 22(4), pages 331-344, June.
    • Handle: RePEc:kap:rqfnac:v:22:y:2004:i:4:p:331-344
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    Cited by:

    1. Wu, C.C. & Lee, Jack C., 2007. "Estimation of a utility-based asset pricing model using normal mixture GARCH(1,1)," Economic Modelling, Elsevier, vol. 24(2), pages 329-349, March.

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