The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset pricing models. It has recently been pointed out that the generality of the SDF method may come at the cost of estimation efficiency. We show that there is no need for this concern....

The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset pricing models. It has recently been pointed out that the generality of the SDF method may come at the cost of estimation efficiency. We show that there is no need for this concern....

The well-documented underreaction of stock prices to news exhibits substantial time variation, and comoves with institutional capital and trading motives. We show that higher risk-bearing capacity of financial intermediaries and lower passive ownership of stocks increase price underreaction....