1 Econometric evaluation of asset pricing models

Wayne E. Ferson; Ravi Jagannathan

doi:10.1016/S0169-7161(96)14003-7

1 Econometric evaluation of asset pricing models

Wayne E. Ferson, Ravi Jagannathan

Finance

Research output: Contribution to journal › Review article › peer-review

12 Scopus citations

Abstract

We provide a brief review of the techniques that are based on the generalized method of moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We then describe the pricing kernel representation of a generic asset pricing model; this representation facilitates use of the GMM in a natural way for evaluating the conditional and unconditional versions of most asset pricing models. We also discuss diagnostic methods that provide additional insights.

Original language	English (US)
Pages (from-to)	1-33
Number of pages	33
Journal	Handbook of Statistics
Volume	14
DOIs	https://doi.org/10.1016/S0169-7161(96)14003-7
State	Published - 1996

ASJC Scopus subject areas

Statistics and Probability
Modeling and Simulation
Applied Mathematics

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10.1016/S0169-7161(96)14003-7

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title = "1 Econometric evaluation of asset pricing models",

abstract = "We provide a brief review of the techniques that are based on the generalized method of moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We then describe the pricing kernel representation of a generic asset pricing model; this representation facilitates use of the GMM in a natural way for evaluating the conditional and unconditional versions of most asset pricing models. We also discuss diagnostic methods that provide additional insights.",

author = "Ferson, {Wayne E.} and Ravi Jagannathan",

note = "Funding Information: A variety of asset pricing models have been proposed to explain this phenomenon. Asset pricing models describe how the price of a claim to a future payoff is determined in securities markets. Alternatively, we may view asset pri- * Ferson acknowledges financial support from the Pigott-PACCAR Professorship at the University of Washington. Jagannathan acknowledges financial support from the National Science Foundation, grant SBR-9409824. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.",

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AU - Jagannathan, Ravi

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PY - 1996

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N2 - We provide a brief review of the techniques that are based on the generalized method of moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We then describe the pricing kernel representation of a generic asset pricing model; this representation facilitates use of the GMM in a natural way for evaluating the conditional and unconditional versions of most asset pricing models. We also discuss diagnostic methods that provide additional insights.

AB - We provide a brief review of the techniques that are based on the generalized method of moments (GMM) and used for evaluating capital asset pricing models. We first develop the CAPM and multi-beta models and discuss the classical two-stage regression method originally used to evaluate them. We then describe the pricing kernel representation of a generic asset pricing model; this representation facilitates use of the GMM in a natural way for evaluating the conditional and unconditional versions of most asset pricing models. We also discuss diagnostic methods that provide additional insights.

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1 Econometric evaluation of asset pricing models

Abstract

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