Reference-Dependent Preferences and the Empirical Pricing Kernel Puzzle

Maria Grith, Wolfgang Härdle and Volker Krätschmer

Review of Finance, 2017, vol. 21, issue 1, 269-298

Abstract: 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: C02 D01 D53 G13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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