Assessing misspecified asset pricing models with empirical likelihood estimators

Caio Almeida, René Garcia

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

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 CressieRead family of discrepancies, and illustrate their use with an assessment of the Consumption Asset Pricing Model.

Original languageEnglish (US)
Pages (from-to)519-537
Number of pages19
JournalJournal of Econometrics
Volume170
Issue number2
DOIs
StatePublished - Oct 1 2012
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • CressieRead discrepancies
  • Euler equations
  • Generalized minimum contrast estimators
  • Model misspecification
  • Stochastic discount factor

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