Advances in Consumption-Based Asset Pricing: Empirical Tests
The last 15 years has brought forth an explosion of research on consumption-based asset pricing as a leading contender for explaining aggregate stock market behavior. This research has propelled further interest in consumption-based asset pricing, as well as some debate. This chapter surveys the growing body of empirical work that evaluates today's leading consumption-based asset pricing theories using formal estimation, hypothesis testing, and model comparison. In addition to summarizing the findings and debate, the analysis seeks to provide an accessible description of a few key econometric methodologies for evaluating consumption-based models, with an emphasis on method-of-moments estimators. Finally, the chapter offers a prescription for future econometric work by calling for greater emphasis on methodologies that facilitate the comparison of multiple competing models, all of which are potentially misspecified, while calling for reduced emphasis on individual hypothesis tests of whether a single model is specified without error.
|Date of creation:||Feb 2011|
|Publication status:||published as Handbook of the Economics of Finance Volume 2, Part B, 2013, Pages 799–906 Cover image Chapter 12 – Advances in Consumption-Based Asset Pricing: Empirical Tests * Sydney C. Ludvigson|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Jules H. van Binsbergen & Michael W. Brandt & Ralph S.J. Koijen, 2010.
"On the Timing and Pricing of Dividends,"
NBER Working Papers
16455, National Bureau of Economic Research, Inc.
- Jules Vanbinsbergen & Michael W. Brandt & Ralph Koijen, 2010. "On the Timing and Pricing of Dividends," Working Papers 2010-010, Becker Friedman Institute for Research In Economics.
- Jules H. van Binsbergen & Michael W. Brandt & Ralph S.J. Koijen, . "On the Timing and Pricing of Dividends," Swiss Finance Institute Research Paper Series 11-13, Swiss Finance Institute.
- Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Rafael, 2007. "On the Fit of New Keynesian Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 123-143, April.
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