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Commentary on : Pseudo-True SDFs in Conditional Asset Pricing Models
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Kan, Raymond and Robotti, Cesare (2020) Commentary on : Pseudo-True SDFs in Conditional Asset Pricing Models. Journal of Financial Econometrics, 18 (4). pp. 729-735. doi:10.1093/jjfinec/nbaa001
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Official URL: https://doi.org/10.1093/jjfinec/nbaa001
Abstract
Asset pricing models are, at best, approximations of reality and are bound to be misspecified. However, it can still be useful to empirically evaluate the degree of model misspecification and the relative performance of competing asset pricing models using actual data. In their seminal paper, Hansen and Jagannathan (1997, HJ hereafter) propose two measures of model misspecification, which are now routinely used for parameter estimation, specification testing, and model selection. The first one measures the distance between the proposed stochastic discount factor (SDF) and the set of admissible SDFs (i.e., the set of SDFs that price a given set of test assets correctly). The second one measures the distance between the...
| Item Type: | Journal Item | ||||||||
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Journal of Financial Econometrics | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 1479-8409 | ||||||||
| Official Date: | September 2020 | ||||||||
| Dates: |
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| Volume: | 18 | ||||||||
| Number: | 4 | ||||||||
| Page Range: | pp. 729-735 | ||||||||
| DOI: | 10.1093/jjfinec/nbaa001 | ||||||||
| Status: | Not Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Related URLs: |
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