IDEAS home Printed from https://ideas.repec.org/a/now/jnlcfr/104.00000154.html
   My bibliography  Save this article

Robust Inference for Consumption-Based Asset Pricing with Power

Author

Listed:
  • Tim A. Kroencke

Abstract

Kleibergen and Zhan (2020) propose a new approach to test consumption-based asset pricing models that is robust to the “useless” factor problem, i.e., concluding too often that a factor is priced when the factor is actually uncorrelated with the test assets and is not priced. I show that even when factor correlation is economically large and significant (think of 0.40 and larger), their testing approach lacks power in small samples to detect sufficient factor correlation or to find that a factor is priced. I propose simple remedies that help to achieve robust and powerful asset pricing tests.

Suggested Citation

  • Tim A. Kroencke, 2025. "Robust Inference for Consumption-Based Asset Pricing with Power," Critical Finance Review, now publishers, vol. 14(1), pages 129-178, March.
    • Handle: RePEc:now:jnlcfr:104.00000154
    DOI: 10.1561/104.00000154
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/104.00000154
    Download Restriction: no
    File URL: https://libkey.io/10.1561/104.00000154?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    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:now:jnlcfr:104.00000154. 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: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

    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.