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| Title: | | Efficient, regression-based estimation of dynamic asset pricing models  |
| Authors: | | Adrian, Tobias Crump, Richard K. Moench, Emanuel |
| Issue Date: | | 2011 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 493 |
| Abstract: | | We study regression-based estimators for beta representations of dynamic asset pricing models with affine and exponentially affine pricing kernel specifications. These estimators extend static cross-sectional asset pricing estimators to settings where prices of risk vary with observed state variables. We identify conditions under which four-stage regression-based estimators are efficient and also present alternative, closed-form linearized maximum likelihood (LML) estimators. We provide multi-stage standard errors necessary to conduct inference for asset pricing tests. In empirical applications, we find that time-varying prices of risk are pervasive, thus favoring dynamic cross-sectional asset pricing models over standard unconditional specifications. |
| Subjects: | | dynamic asset pricing Fama-MacBeth regressions financial econometrics |
| JEL: | | E58 G28 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
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