Advances in Consumption-Based Asset Pricing: Empirical Tests / Sydney C. Ludvigson.

Format:

Book

Author/Creator:

Ludvigson, Sydney C.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16810.

NBER working paper series no. w16810

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Advances in Consumption-Based Asset Pricing

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

The last 15 years has brought forth an explosion of research on consumption-based asset pricing as a leading contender for explaining aggregate stock market behavior. This research has propelled further interest in consumption-based asset pricing, as well as some debate. This chapter surveys the growing body of empirical work that evaluates today's leading consumption-based asset pricing theories using formal estimation, hypothesis testing, and model comparison. In addition to summarizing the findings and debate, the analysis seeks to provide an accessible description of a few key econometric methodologies for evaluating consumption-based models, with an emphasis on method-of-moments estimators. Finally, the chapter offers a prescription for future econometric work by calling for greater emphasis on methodologies that facilitate the comparison of multiple competing models, all of which are potentially misspecified, while calling for reduced emphasis on individual hypothesis tests of whether a single model is specified without error.

Notes:

Print version record

February 2011.