Open AccessPosted Content
Estimating the Continuous Time Consumption Based Asset Pricing Model
Reads0
Chats0
TLDR
In this paper, a consumption-based asset pricing model predicts that excess yields are determined in a fairly simple way by the market's degree of relative risk aversion and by the pattern of covariances between percapita consumption growth and asset returns.Abstract:
The consumption based asset pricing model predicts that excess yields are determined in a fairly simple way by the market's degree of relative risk aversion and by the pattern of covariances between percapita consumption growth and asset returns Estimation and testingis complicated by the fact that the model's predictions relate to the instantaneous flow of consumption and point-in-time asset values, but only data on the integral or unit average of the consumption flow is available In our paper, we show how to estimate the parameters of interest consistently from the available data by maximum likelihood We estimate the market's degree of relative risk aversion and the instantaneous covariances of asset yields and consumption using six different data sets We also test the model's overidentifying restrictionsread more
Citations
More filters
Posted Content
The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors
TL;DR: In this article, a linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates.
Journal ArticleDOI
Habit Formation: A Resolution of the Equity Premium Puzzle
TL;DR: In the context of an economy with rational expectations, Mehra and Prescott as discussed by the authors showed that the problem of the equity premium puzzle can be solved by relaxing the time separability of von Neumann-Morgenstern preferences to allow for adjacent complementarity in consumption.
Journal ArticleDOI
An Empirical Comparison of Alternative Models of the Short‐Term Interest Rate
TL;DR: In this article, the authors compare a variety of continuous-time models of the short-term riskless rate using the Generalized Method of Moments and find that the most successful models are those that allow the volatility of interest rate changes to be highly sensitive to the level of the riskless rates.
Book
Finite sample properties of some alternative GMM estimators
TL;DR: In this article, the authors investigate the small-sample properties of three alternative generalized method of moments (GMM) estimators of asset-pricing models and assess the performance of the asymptotic theory for making inferences based directly on the deterioration of GMM criterion functions.
Posted Content
The Equity Premium: It's Still a Puzzle
John Y. Campbell,Dean Corbae,John Heaton,Mark Huggett,Beth In,John Kennan,Deborah Lucas,Barbara McCutcheon,Rajnish Mehra +8 more
TL;DR: In this paper, the authors discuss and assess various theoretical attempts to explain these two different empirical phenomena: the large "equity premium" and the low "risk free rate" and show that while there are several plausible explanations for the low level of Treasury returns, the large equity premium is still largely a mystery to economists.
References
More filters
Journal ArticleDOI
An intertemporal asset pricing model with stochastic consumption and investment opportunities
TL;DR: In this paper, the authors derived a single-beta asset pricing model in a multi-good, continuous-time model with uncertain consumption-goods prices and uncertain investment opportunities.
Book ChapterDOI
Optimum Consumption and Portfolio Rules in a Continuous-Time Model*
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
Journal ArticleDOI
Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns
TL;DR: In this paper, the authors studied the time-series behavior of asset returns and aggregate consumption in a representative consumer model and imposing restrictions on preferences and the joint distribution of consumption and returns.
Book ChapterDOI
Chapter 20 Continuous time stochastic models and issues of aggregation over time
TL;DR: In this article, statistical methods that are applicable to a class of continuous time stochastic models are described and the theoretical foundations of these methods are discussed, and the structural parameters are estimated from a sample comprising a sequence of discrete observations of the variables.
Journal ArticleDOI
The factorization of matricial spectral densities
TL;DR: In this article, a new iterative solution is given, for the problem of inner-outer factorization of matricial spectral density functions, and two methods of implementing the solution are given, together with an example.