EconPapers    
Economics at your fingertips  
 

Empirical Pricing Kernels: Evidence from the Hong Kong Stock Market

Xinyu Wu (), Senchun Ren () and Hailin Zhou ()
Additional contact information
Xinyu Wu: School of Finance, Anhui University of Finance and Economics, China
Senchun Ren: School of Finance, Anhui University of Finance and Economics, China
Hailin Zhou: School of Finance, Anhui University of Finance and Economics, China

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2017, vol. 51, issue 4, 263-278

Abstract: In this paper, we investigate the empirical pricing kernels for the Hong Kong stock market. We deal with semiparametric estimation of the empirical pricing kernel as the ratio of the objective and risk-neutral densities, under a consistent parametric framework of the non-affine GARCH diffusion model. An efficient importance sampling (EIS)-based joint maximum likelihood estimation method is developed for the objective and risk-neutral densities, using the Hang Seng Index (HSI) and index warrants data. Empirical results show that there exists a reference point and around this reference point the empirical pricing kernel exhibits a hump. The market utility function does not correspond to standard specification of utility function in the classical expected utility theory, but exhibits a convex form below the reference point and a concave form above it, and the investors act risk seeking around the reference point.

Keywords: pricing kernel; utility function; risk aversion; GARCH diffusion model; maximum likelihood estimation. (search for similar items in EconPapers)
JEL-codes: C13 C32 C58 G13 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
ftp://www.ipe.ro/RePEc/cys/ecocyb_pdf/ecocyb4_2017p263-278.pdf

Related works:
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:cys:ecocyb:v:50:y:2017:i:4:p:263-278

Access Statistics for this article

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH is currently edited by Gheorghe RUXANDA

More articles in ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH from Faculty of Economic Cybernetics, Statistics and Informatics Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ().

 
Page updated 2018-07-21
Handle: RePEc:cys:ecocyb:v:50:y:2017:i:4:p:263-278