Reference-Dependent Preferences and the Empirical Pricing Kernel Puzzle
Wolfgang Härdle () and
Review of Finance, 2017, vol. 21, issue 1, 269-298
Supported by several recent investigations, the empirical pricing kernel (PK) puzzle might be considered as a stylized fact. Based on an economic model with reference-dependent preferences for the financial investors, we emphasize a microeconomic view that explains the puzzle via state-dependent aggregate preferences. We also investigate how the shape of the PK estimated from option and stock market index returns changes in relation to the volatility risk premium.
JEL-codes: D01 D53 C02 G13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:21:y:2017:i:1:p:269-298.
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