Abstract

http://ssrn.com/abstract=1792875
 
 

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Advances in Consumption-Based Asset Pricing: Empirical Tests


Sydney C. Ludvigson


New York University - Department of Economics; National Bureau of Economic Research (NBER)

February 6, 2011

THE HANDBOOK OF THE ECONOMICS OF FINANCE, George Constantinides, Vol. 2, Milton Harris, Rene Stulz, eds., Elsevier Science B.V., 2011

Abstract:     
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.

Number of Pages in PDF File: 123

JEL Classification: G11, G12, E44, E21

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Date posted: March 27, 2011 ; Last revised: April 14, 2011

Suggested Citation

Ludvigson, Sydney C., Advances in Consumption-Based Asset Pricing: Empirical Tests (February 6, 2011). THE HANDBOOK OF THE ECONOMICS OF FINANCE, George Constantinides, Vol. 2, Milton Harris, Rene Stulz, eds., Elsevier Science B.V., 2011. Available at SSRN: http://ssrn.com/abstract=1792875

Contact Information

Sydney C. Ludvigson (Contact Author)
New York University - Department of Economics ( email )
19 West 4th Street, 6th floor
New York, NY 10012
United States
212-998-8927 (Phone)
212-995-4186 (Fax)
HOME PAGE: http://www.econ.nyu.edu/user/ludvigsons/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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