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Assessing Asset Pricing Models Using Revealed Preference

Jonathan B. Berk and Jules van Binsbergen ()
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Jonathan B. Berk: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: We propose a new method of testing asset pricing models that relies on using quantities rather than simply prices or returns. We use the capital flows into and out of mutual funds to infer which risk model investors use. We derive a simple test statistic that allows us to infer, from a set of candidate models, the model that is closest to the model that investors use in making their capital allocation decisions. Using our method, we assess the performance of the most commonly used asset pricing models in the literature.

Date: 2015-03
New Economics Papers: this item is included in nep-ifn
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http://www.gsb.stanford.edu/faculty-research/worki ... -revealed-preference

Related works:
Journal Article: Assessing asset pricing models using revealed preference (2016) Downloads
Working Paper: Assessing Asset Pricing Models Using Revealed Preference (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3130

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