Econometric Evaluation of Asset Pricing Models

Lars Peter Hansen; J. B. Heaton; Erzo G. J. Luttmer

doi:10.1093/rfs/8.2.237

Econometric Evaluation of Asset Pricing Models

Lars Peter Hansen^1,2; J. B. Heaton³; Erzo G. J. Luttmer⁴

¹ University of Chicago · ² National Opinion Research Center · ³ Moscow Institute of Thermal Technology · ⁴ Northwestern University

Review of Financial Studies 1995

In this article we provide econometric tools for the evaluation of intertemporal asset pricing models using specification-error and volatility bounds. We formulate analog estimators of these bounds, give conditions for consistency, and derive the limiting distribution of these estimators. The analysis incorporates market frictions such as short-sale constraints and proportional transactions costs. Among several applications we show how to use the methods to assess specific asset pricing models and to provide non-parametric characterizations of asset pricing anomalies.

DOI: 10.1093/rfs/8.2.237
Volume: 8 (2)
Pages: 237-274
Language: en
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