Continuous-time Markov processes can be characterized conveniently by their infinitesimal generators. For such processes there exist forward and reverse-time generators. We show how to use these generators to construct moment conditions implied by stationary Markov processes. Generalized method of moments estimators and tests can be constructed using these moment conditions. The resulting econometric methods are designed to be applied to discrete-time data obtained by sampling continuous-time Markov processes.

The purpose of this paper is to investigate testable implications of equilibrium asset pricing models. We derive a general representation for asset prices that displays the role of conditioning information. This representation is then used to examine restrictions implied by asset pricing models on the unconditional moments of asset payoffs and prices. In particular, we analyze the effect of information omission on the mean-variance frontier of one-period returns on portfolios of securities. Also, we deduce an information extension of equilibrium pricing functions that is useful in deriving restrictions on the unconditional moments of payoffs and prices.

[This paper describes a method for estimating and testing nonlinear rational expectations models directly from stochastic Euler equations. The estimation procedure makes sample counterparts to the population orthogonality conditions implied by the economic model close to zero. An attractive feature of this method is that the parameters of the dynamic objective functions of economic agents can be estimated without explicitly solving for the stochastic equilibrium.]

The notion that some high stakes need to be attached to direct measures of teachers’ class-room performance as a control for quality in the work force is an idea gaining traction in public education. One such proposal prescribes low-ering the barriers to entry into teaching while simultaneously being more selective about which teachers are retained when they become eligible for tenure (Robert Gordon, Thomas J. Kane, and Douglas O. Staiger 2006; Eric A. Hanushek 2009).

This paper devises an empirical methodology for discriminating between the median voter model and the oligarchy choice model when applied to the collective provision of a public good. In particular, an empirical methodology is engineered so that a nested test procedure can evaluate competing models. The authors apply this methodology to examine the demand for military activities of ten members of the NATO alliance. A two-stage least squares procedure, corrected for autocorrelation, is used to estimate the demand equations. Test results vary: some allies abide by the median voter model, others by the oligarchy model, and still others by neither.

We introduce a pricing kernel with time-varying volatility risk aversion to explain the observed time variations in the shape of the pricing kernel. When combined with the Heston-Nandi GARCH model, this framework yields a tractable option pricing model in which the variance risk ratio (VRR) emerges as a key variable. We show that the VRR is closely linked to economic fundamentals, as well as sentiment and uncertainty measures. A novel approximation method provides analytical option pricing formulas, and we demonstrate substantial reductions in pricing errors through an empirical application to the S&P 500 index, the CBOE VIX, and option prices.