Supplemental Appendix to "Macro-Finance Decoupling: Robust Evaluations of Macro Asset Pricing Models"

Abstract

This supplemental appendix provides the following supporting materials. Sections SA -- SC
provide the proofs of Lemmas A1 -- A7 in the appendix to the main text Cheng, Dou, and Liao
(2021). Section SA provides the proofs of several lemmas on the asymptotic convergence of
the random components in the test statistic and the conditional critical value. Section
SB verifies the bounded Lipschitz properties of the test statistic and the conditional critical
value, which are used to show their weak convergence in large samples. Section SC includes
some auxiliary lemmas. Section SD provides additional theoretical results on the power of the
proposed conditional test. Section SE provides comparison with some power envelopes through
simulations. Section SF collects details and additional results of the empirical application.

The full-text version of this paper can be found at: https://ssrn.com/abstract=3609627.

Keywords: Conditional inference, Information imbalance, Long-run risk, Rare disasters, Structural asset pricing, Weak identification.

JEL Classification: C12, C32, C52, G12.