Bayesian Estimation of Stochastic Discount Factors |
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Authors: | Stephen Gordon Lucie Samson Benoît Carmichael |
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Institution: | Département d'économique and CRéFA , Université Laval , Quebec , Québec , G1K 7P4 , Canada |
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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 |
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Keywords: | Asset pricing Hansen–Jagannathan bounds Markov-chain Monte Carlo Metropolis–Hastings algorithm |
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