Evaluating stochastic discount factors from term structure models

This paper examines the feasibility of applying the stochastic discount factor methodology to fixed-income data using modern term structure models. Using this approach the researcher can examine returns on bond portfolios whose exact composition is unknown, as is often the case. This paper proposes an observable proxy for the SDF from continuous-time models and documents via Monte Carlo methods the properties of the GMM estimator based on using this proxy.

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Year of publication:	2009
Authors:	Farnsworth, Heber K.
Published in:	Journal of Empirical Finance. - Elsevier, ISSN 0927-5398. - Vol. 16.2009, 5, p. 852-861
Publisher:	Elsevier
Keywords:	Stochastic discount factors Term structure models Monte Carlo method GMM estimator

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008482938