GMM tests of stochastic discount factor models with useless factors

• 成果类型: Article
• 署名作者: Kan, R; Zhang, C
• 署名单位: University of Alberta; Hong Kong University of Science & Technology; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(99)00033-1
• 发表日期: 1999
• 页码: 103-127
• 关键词: stochastic discount factor models; generalized method of moments; nonidentifiability; useless factors; misspecification

摘要

This paper studies generalized method of moments tests for the stochastic discount factor representation of asset pricing models when one of the proposed factors is in fact useless, defined as being independent of the asset returns. Analytic results on asymptotic distributions and simulation results on finite sample distributions both show that(i) the Wald test tends to overreject the hypothesis of a zero factor premium for a useless factor when the model is misspecified, (ii) with the presence of a useless factor, the power of the over-identifying restriction test in rejecting misspecified models is reduced, and in some cases a misspecified model with a useless factor is more likely to be accepted than the true model. (C) 1999 Elsevier Science S.A. All rights reserved.