Does the Ross recovery theorem work empirically?

• 成果类型: Article
• 署名作者: Jackwerth, Jens Carsten; Menner, Marco
• 署名单位: University of Konstanz; Universitat Ramon Llull; Escuela Superior de Administracion y Direccion de Empresas (ESADE)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.03.006
• 发表日期: 2020
• 关键词: Ross recovery; stochastic discount factor; Risk-neutral density; Transition state prices; Physical probabilities

摘要

Starting with the fundamental relation that state prices are the product of physical probabilities and the stochastic discount factor, Ross (2015) shows that, given strong assumptions, knowing state prices suffices to back out physical probabilities and the stochastic discount factor at the same time. We find that such recovered physical distributions based on the S&P 500 index are incompatible with future returns and fail to predict future returns and realized variances. These negative results are even stronger when we add economically reasonable constraints. Simple benchmark methods based on a power utility agent or the historical return distribution cannot be rejected. (C) 2020 Elsevier B.V. All rights reserved.