A two-step indirect inference approach to estimate the long-run risk asset pricing model

作者：Grammig Joachim^*; Kuechlin Eva Maria

来源：Journal of Econometrics, 2018, 205(1): 6-33.

DOI：10.1016/j.jeconom.2018.03.003

• Indirect inference estimation
• Asset pricing
• Long-run risk

The long-run consumption risk model provides a theoretically appealing explanation for prominent asset pricing puzzles, but its intricate structure presents a challenge for econometric analysis. This paper proposes a two-step indirect inference approach that disentangles the estimation of the model's macro-economic dynamics and the investor's preference parameters. A Monte Carlo study explores the feasibility and efficiency of the estimation strategy. We apply the method to recent U.S. data and provide a critical reassessment of the long-run risk model's ability to reconcile the real economy and financial markets. This two-step indirect inference approach is potentially useful for the econometric analysis of other prominent consumption-based asset pricing models that are equally difficult to estimate.

• 出版日期2018-7