 Pricing kernel monotonicity and term structure: Evidence from ChinaYuhan Jiao, Qiang Liu and Shuxin Guo Journal of Banking & Finance, 2021, vol. 123, issue C Abstract: Using all the data of options on the China 50 ETF, we study the pricing kernel monotonicity by adapting the recently proposed conditional density integration approach of Linn-Shive-Shumway (LSS). Methodologically, we improve LSS on several useful aspects and make its procedures applicable universally. Empirically, we provide new supporting evidence for the monotonicity of pricing kernel from a Chinese portfolio. Equally important, we are the first to obtain monotonic pricing kernels over the whole range of returns. Finally, we initialize the study of the term structure of pricing kernel and report the results with one-, two-, four- and eight-week terms. Pricing kernels show little variation for less than one-month terms, but exhibit a higher curvature for eight weeks, implying higher aggregate risk for longer-term positive returns. Keywords: Pricing kernel monotonicity; Pricing kernel term structure; Options on the China 50 ETF; Conditional density integration; Standardized pricing kernel estimation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:123:y:2021:i:c:s0378426620302983 DOI: 10.1016/j.jbankfin.2020.106037 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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