Nonparametric Euler Equation Identification andEstimation
Escanciano, J. C.
Cambridge Working Papers in Economics
Faculty of Economics
MetadataShow full item record
Escanciano, J. C., Hoderlein, S., Lewbel, A., Linton, O., & Srisuma, S. (2015). Nonparametric Euler Equation Identification andEstimation. https://doi.org/10.17863/CAM.5784
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 esti-mator 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.nonparametric identification
Euler equations, marginal utility, pricing kernel, Fredholm equations, integral equations, asset pricing.
This record's DOI: https://doi.org/10.17863/CAM.5784
This record's URL: https://www.repository.cam.ac.uk/handle/1810/255304
All Rights Reserved
Licence URL: https://www.rioxx.net/licenses/all-rights-reserved/