Nonparametric Euler Equation Identification and Estimation

Juan Carlos Escanciano, Stefan Hoderlein, Arthur Lewbel, Oliver Linton and Sorawoot Srisuma

No 757, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We consider nonparametric identiÖcation and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the Örst paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness). We also propose a novel nonparametric estimator based on our identification analysis, which combines standard kernel estimation with the computation of a matrix eigenvector problem. Our estimator avoids the ill-posed inverse issues associated with nonparametric instrumental variables estimators. We derive limiting distributions for our estimator and for relevant associated functionals. A Monte Carlo shows a satisfactory finite sample performance for our estimators.

Keywords: Euler equations; marginal utility; pricing kernel; Fredholm equations; integral equations; nonparametric identiÖcation; asset pricing (search for similar items in EconPapers)
JEL-codes: C14 D91 E21 G12 (search for similar items in EconPapers)
Date: 2010-06-01, Revised 2020-03-15
New Economics Papers: this item is included in nep-ecm and nep-mic
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: NONPARAMETRIC EULER EQUATION IDENTIFICATION AND ESTIMATION (2021)
Working Paper: Nonparametric Euler Equation Identi?cation and Estimation (2020)
Working Paper: Nonparametric Euler equation identification and estimation (2015)
Working Paper: Nonparametric Euler Equation Identification andEstimation (2015)
Working Paper: Nonparametric Euler equation identification and estimation (2015)
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