Sensitivity, Moment Conditions, and the Risk-Free Rate in Yogo (2006)

Nicola Borri and Giuseppe Ragusa ()

Critical Finance Review, 2017, vol. 6, issue 2, 381-393

Abstract: In this paper, we show that results presented in the seminal paper by Yogo, A Consumption Based Explanation of Expected Stock Returns, cannot be replicated. We find different estimates for the parameters and we obtain values of over-identified statistics that being much larger than those in the original paper indicate rejection of the durable consumption asset pricing model. By careful inspection of Yogo’s replication files, we were able to track down the inconsistency to a coding bug. The rejection of the durable model is exemplified by its inability to simultaneously explain the risk-free rate and excess stock returns.

Keywords: Equity premium; Nonlinear GMM estimation; Durable model (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000050

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