|
|
|
|
||||
|
||||
On the Hansen-Jagannathan Distance with a No-Arbitrage ConstraintNikolay GospodinovConcordia University, Quebec - Department of Economics Cesare RobottiFederal Reserve Bank of Atlanta; EDHEC Risk Institute Raymond KanUniversity of Toronto - Rotman School of Management March 28, 2012 Abstract: We provide an in-depth analysis of the theoretical properties of the Hansen-Jagannathan (HJ) distance that incorporates a no-arbitrage constraint. Under a multivariate elliptical distribution assumption, we present explicit expressions for the HJ-distance with a no-arbitrage constraint, the associated Lagrange multipliers, and the SDF parameters in the case of linear SDFs. This allows us to analyze the benefits and costs of using the HJ-distance with a no-arbitrage constraint to rank models. Finally, we demonstrate the practical relevance of our theoretical findings in an empirical illustration of some popular asset pricing models.
Number of Pages in PDF File: 53 Keywords: Hansen-Jagannthan distrance, no-arbitrage constraint, model comparison JEL Classification: G12, C12, C13 working papers seriesDate posted: January 13, 2010 ; Last revised: April 2, 2012Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo2 in 0.421 seconds
