Agnostic Tests of Stochastic Discount Factor Theory

51 Pages Posted: 19 Apr 2015 Last revised: 14 Dec 2019

See all articles by Kuntara Pukthuanthong

Kuntara Pukthuanthong

University of Missouri, Columbia

Richard Roll

California Institute of Technology

Date Written: November 22, 2015


We propose and implement tests for the existence of a common stochastic discount factor (SDF). Our tests are agnostic because they do not require macroeconomic data or preference assumptions; they depend only on observed asset returns. Our test statistic is immune to the form of the multivariate return distribution, including its factor structure. After examining test features and power with simulations, we apply the tests empirically to data on U.S. equities, bonds, currencies, commodities and real estate. The empirical evidence is consistent with a unique positive SDF that prices all U.S. assets and satisfies the Hansen/Jagannathan variance bound.

Keywords: Stochastic discount factor, asset pricing

JEL Classification: G1; G12

Suggested Citation

Pukthuanthong, Kuntara and Roll, Richard W., Agnostic Tests of Stochastic Discount Factor Theory (November 22, 2015). Available at SSRN: or

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: http://

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics