Finite Sample Properties of Tests of the Epstein-Zin Asset Pricing Model
60 Pages Posted: 11 Dec 1998
There are 2 versions of this paper
Finite Sample Properties of Tests of the Epstein-Zin Asset Pricing Model
Finite Sample Properties of Tests of the Epstein-Zin Asset Pricing Model
Date Written: September 1998
Abstract
This paper investigates the small sample properties of Hansen and Singleton (1982)-type GMM tests of asset pricing restrictions implied by Epstein and Zin (1989) preferences. The Monte Carlo results suggest that tests of the Epstein and Zin (1989) asset pricing model often have little size-adjusted power to reject asset pricing restrictions implied by simpler, time and state separable expected utility preferences, even when parameters are chosen to make the difference between the relative risk aversion parameter and the reciprocal of the intertemporal substitution parameter large. There is evidence that a Wald test has greater power than other tests and that use of Hansen, Heaton and Yaron's (1996) continuous-updating GMM estimator improves the power of the tests.
JEL Classification: C52, G12
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Instrumental Variables Regression with Weak Instruments
By Douglas Staiger and James H. Stock
-
Testing for Weak Instruments in Linear IV Regression
By James H. Stock and Motohiro Yogo
-
Testing for Weak Instruments in Linear IV Regression
By James H. Stock and Motohiro Yogo
-
A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments
By James H. Stock, Jonathan H. Wright, ...
-
Instrument Relevance in Multivariate Linear Models: A Simple Measure
By John Shea
-
By Charles R. Nelson and Richard Startz
-
Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator
By Charles R. Nelson and Richard Startz
-
A New Specification Test for the Validity of Instrumental Variables
By Jinyong Hahn and Jerry A. Hausman
-
Consistent Estimation with a Large Number of Weak Instruments
By John C. Chao and Norman R. Swanson
-
Does Head Start Make a Difference?
By Janet Currie and Duncan Thomas