Assessing misspecified asset pricing models with empirical likelihood estimators

Caio Almeida () and René Garcia

Journal of Econometrics, 2012, vol. 170, issue 2, 519-537

Abstract: Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of admissible stochastic discount factors. We extend their fundamental contribution by considering Minimum Discrepancy projections where misspecification is measured by a family of convex functions that take into account higher moments of asset returns. The Minimum Discrepancy problems are solved on dual spaces producing a family of estimators that captures the least-square problem as a particular case. We derive the asymptotic distributions of the estimators for the Cressie–Read family of discrepancies, and illustrate their use with an assessment of the Consumption Asset Pricing Model.

Keywords: Stochastic discount factor; Euler equations; Generalized minimum contrast estimators; Model misspecification; Cressie–Read discrepancies (search for similar items in EconPapers)
JEL-codes: C1 C5 G1 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:170:y:2012:i:2:p:519-537

DOI: 10.1016/j.jeconom.2012.05.020

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