We propose a nonparametric Bayesian approach for the estimation of the pricing kernel. Historical stock returns and … the option-adjusted physical measure to construct an option-adjusted pricing kernel. An empirical investigation on the S …&P 500 Index from 2002 to 2015 shows that the option-adjusted pricing kernel is consistently monotonically decreasing …

new explanation for the pricing kernel puzzle emerges. We show, by example, that even a tiny difference in tail …-risk perception by the two investor types can explain the pricing kernel puzzle. …

new explanation for the pricing kernel puzzle emerges. We show, by example, that even a tiny difference in tail …-risk perception by the two investor types can explain the pricing kernel puzzle. …