Seminonparametric Estimation of Conditionally Constrained Heterogeneous Processes: Asset Pricing Applications

A. Gallant and George Tauchen ()

Econometrica, 1989, vol. 57, issue 5, 1091-1120

Abstract: The extent to which specification error can explain rejection of the intertemporal capital asset pricing model is investigated using seminonparametric representations of the law of motion and utility. The authors find (1) consumption growth and asset returns display conditional heterogeneity, but this does not account for rejection of models assuming additively separable, constant relative risk aversion utility; (2) the model is accepted upon relaxation of the utility function in the direction of nonseparable utility; and (3) relaxation reduces overprediction of the conditional variance of consumption growth, overprediction of the conditional covariance of asset returns with consumption growth, and the equity premium. Copyright 1989 by The Econometric Society.

Date: 1989
References: Add references at CitEc
Citations: View citations in EconPapers (190)

Downloads: (external link)
http://links.jstor.org/sici?sici=0012-9682%2819890 ... O%3B2-W&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: SEMINONPARAMETRIC ESTIMATION OF CONDITIONALLY CONSTRAINED HETEROGENEOUS PROCESSES: ASSET PRICING APPLICATIONS (1988)
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:ecm:emetrp:v:57:y:1989:i:5:p:1091-1120

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().