Empirical Evaluation of Asset‐Pricing Models: A Comparison of the SDF and Beta Methods

Ravi Jagannathan and Zhenyu Wang

Journal of Finance, 2002, vol. 57, issue 5, 2337-2367

Abstract: The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset‐pricing models. There have been concerns that, compared to the classical beta method, the generality of the SDF method comes at the cost of efficiency in parameter estimation and power in specification tests. We establish the correct framework for comparing the two methods and show that the SDF method is as efficient as the beta method for estimating risk premiums. Also, the specification test based on the SDF method is as powerful as the one based on the beta method.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
https://doi.org/10.1111/1540-6261.00498

Related works:
Working Paper: Empirical Evaluation of Asset Pricing Models: A Comparison of the SDF and Beta Methods (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:57:y:2002:i:5:p:2337-2367

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().