Abstract: The Journal of FinanceVolume 52, Issue 4 p. 1383-1410 Article Approximating the Asset Pricing Kernel DAVID A. CHAPMAN, DAVID A. CHAPMANFinance Department, Graduate School of Business, The University of Texas at Austin. A portion of this work was completed while I was on leave at the William E. Simon Graduate School of Business Administration at the University of Rochester. I thank Tom Cooley, David Ellis, Ludger Hentschel, Burton Hollifield, John Long, Neil Pearson, Ehud Ronn, Bill Schwert, Jay Shanken, Dan Slesnick, Laura Starks, René Stulz (the editor), Stanley Zin, an anonymous referee, and participants in the Finance workshops at Texas A&M University, the University of British Columbia, the William E. Simon Graduate School of Business at the University of Rochester, and the University of Illinois at Urbana-Champaign.Search for more papers by this author DAVID A. CHAPMAN, DAVID A. CHAPMANFinance Department, Graduate School of Business, The University of Texas at Austin. A portion of this work was completed while I was on leave at the William E. Simon Graduate School of Business Administration at the University of Rochester. I thank Tom Cooley, David Ellis, Ludger Hentschel, Burton Hollifield, John Long, Neil Pearson, Ehud Ronn, Bill Schwert, Jay Shanken, Dan Slesnick, Laura Starks, René Stulz (the editor), Stanley Zin, an anonymous referee, and participants in the Finance workshops at Texas A&M University, the University of British Columbia, the William E. Simon Graduate School of Business at the University of Rochester, and the University of Illinois at Urbana-Champaign.Search for more papers by this author First published: 18 April 2012 https://doi.org/10.1111/j.1540-6261.1997.tb01114.xCitations: 50 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat ABSTRACT This article tests a simple consumption-based asset pricing model by approximating the true asset pricing kernel using low-order orthonormal polynomials based on the model's state variables. Approximated kernels based solely on next period's consumption growth are not rejected by overall measures of model fit, but they produce statistically and economically large pricing errors. Approximated kernels based on two quarters of future consumption growth and technology shocks have substantially improved overall fit. In particular, the best of these kernels are capable of eliminating the small firm effect. Citing Literature Volume52, Issue4September 1997Pages 1383-1410 RelatedInformation
Publication Year: 1997
Publication Date: 1997-09-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 29
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