Comparing Consumption-Based Asset-Pricing Models

25 Pages Posted: 15 Dec 2002

Abstract

We make use of a recently developed method to estimate the intertemporal marginal rate of substitution consistent with the fluctuations of asset return data from the Toronto Stock Exchange. These estimates are then used to evaluate various parametric specifications for preferences often used in empirical studies of consumption and asset returns. In contrast to existing studies, we are able to perform a formal statistical comparison of these models. We consider six extensions of the usual power utility model, and we find that none can be said to be a demonstrable improvement on the standard model.

Suggested Citation

Gordon, Stephen and Samson, Lucie, Comparing Consumption-Based Asset-Pricing Models. Canadian Journal of Economics, Vol. 35, No. 3, pp. 586-610, 2002, Available at SSRN: https://ssrn.com/abstract=320535

Stephen Gordon (Contact Author)

Universite Laval ( email )

Departement d'economique
Ste-Foy, Quebec G1K 7P4
Canada
(418) 656-2416 (Phone)
(418) 656-7798 (Fax)

Lucie Samson

Universite Laval ( email )

Ste-Foy, Quebec G1K 7P4
Canada

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