Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130083
Authors: 
Escanciano, Juan Carlos
Hoderlein, Stefan
Lewbel, Arthur
Linton, Oliver
Srisuma, Sorawoot
Year of Publication: 
2015
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP61/15
Abstract: 
We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness). We also propose a novel nonparametric estimator based on our identification analysis, which combines standard kernel estimation with the computation of a matrix eigenvector problem. Our estimator avoids the ill-posed inverse issues associated with existing nonparametric instrumental variables based Euler equation estimators. We derive limiting distributions for our estimator and for relevant associated functionals. We provide a Monte Carlo analysis and an empirical application to US household-level consumption data.
Subjects: 
Euler equations
marginal utility
pricing kernel
Fredholm equations
integral equations
nonparametric identification
asset pricing
JEL: 
C14
D91
E21
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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