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|Title:||Efficient, regression-based estimation of dynamic asset pricing models |
Crump, Richard K.
|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|
|Document Type:||Working Paper|
|Appears in Collections:||Staff Reports, Federal Reserve Bank of New York|
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