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Bayesian Estimation of Stochastic Discount Factors
Authors:Stephen Gordon  Lucie Samson  Benoît Carmichael
Institution:Département d'économique and CRéFA , Université Laval , Quebec , Québec , G1K 7P4 , Canada
Abstract:This article provides a Bayesian method of estimating the marginal posterior distributions for stochastic discount factors associated with observed asset returns. These estimates can be used to provide measures of fit for asset-pricing models and to identify broad features of the characteristics that should be explained. These measures of fit can be used to supplement model-evaluation exercises based on Hansen–Jagannathan bounds
Keywords:Asset pricing  Hansen–Jagannathan bounds  Markov-chain Monte Carlo  Metropolis–Hastings algorithm
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