PRICING KERNEL ESTIMATION: A LOCAL ESTIMATING EQUATION APPROACH
Yu Ren () and
Econometric Theory, 2015, vol. 31, issue 3, 560-580
This paper investigates a general semiparametric stochastic discount factor formulation that avoids functional form misspecification. A new semiparametric estimation procedure is proposed which combines orthogonality conditions and local linear fitting to give a semiparametric generalized estimating equation approach. Asymptotic properties of the estimators are established and we explore the empirical usefulness of the proposed approach to value-weighted stock returns.
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