Nonparametric Euler equation identification and estimation

Arbeitspapier

We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness). We also propose a novel nonparametric estimator based on our identification analysis, which combines standard kernel estimation with the computation of a matrix eigenvector problem. Our estimator avoids the ill-posed inverse issues associated with existing nonparametric instrumental variables based Euler equation estimators. We derive limiting distributions for our estimator and for relevant associated functionals. We provide a Monte Carlo analysis and an empirical application to US household-level consumption data.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cemmap working paper ; No. CWP61/15

Classification and Topics

• Classification: Wirtschaft ; Semiparametric and Nonparametric Methods: General ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Euler equations ; marginal utility ; pricing kernel ; Fredholm equations ; integral equations ; nonparametric identification ; asset pricing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Escanciano, Juan Carlos ; Hoderlein, Stefan ; Lewbel, Arthur ; Linton, Oliver ; Srisuma, Sorawoot
• Event: Veröffentlichung
• (who): Centre for Microdata Methods and Practice (cemmap)
• (where): London
• (when): 2015

Further information

• DOI: doi:10.1920/wp.cem.2015.6115
• Handle: http://hdl.handle.net/10419/130083
• Last update: 10.03.2025, 11:45 AM CET