Does Smooth Ambiguity Matter for Asset Pricing?

A Ronald Gallant, Mohammad Jahan-Parvar and Hening Liu

The Review of Financial Studies, 2019, vol. 32, issue 9, 3617-3666

Abstract: We use the Bayesian method introduced by Gallant and McCulloch (2009) to estimate consumption-based asset pricing models featuring smooth ambiguity preferences. We rely on semi-nonparametric estimation of a flexible auxiliary model in our structural estimation. Based on the market and aggregate consumption data, our estimation provides statistical support for asset pricing models with smooth ambiguity. Statistical model comparison shows that models with ambiguity, learning, and time-varying volatility are preferred to the long-run risk model. We also analyze asset pricing implications of the estimated models. Received April 12, 2016; editorial decision September 11, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhy118 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Does Smooth Ambiguity Matter for Asset Pricing? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:32:y:2019:i:9:p:3617-3666.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().