On a Simple Econometric Approach for Utility-Based Asset Pricing Model

On a Simple Econometric Approach for Utility-Based Asset Pricing Model The Journal of Finance has published an important paper entitled “A Simple Econometric Approach for Utility-Based Asset Pricing Model” by Brown and Gibbon (1985). The main purpose of this paper is to extend the research of Brown and Gibbons (1985) and Karson, Cheng and Lee (1995) in estimating the relative risk aversion (RRA) parameter β in utility-based asset pricing model. First, we review the distributions of RRA parameter estimate $$\hat \beta $$ . Then, a new method to the distribution of $$\hat \beta $$ is derived, and a Bayesian approach for the inference of β is proposed. Finally, empirical results are presented by using market rate of return and riskless rate data during the period December 1925 through December 2001. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

On a Simple Econometric Approach for Utility-Based Asset Pricing Model

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Publisher
Springer Journals
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/B:REQU.0000032602.44080.44
Publisher site
See Article on Publisher Site

Abstract

The Journal of Finance has published an important paper entitled “A Simple Econometric Approach for Utility-Based Asset Pricing Model” by Brown and Gibbon (1985). The main purpose of this paper is to extend the research of Brown and Gibbons (1985) and Karson, Cheng and Lee (1995) in estimating the relative risk aversion (RRA) parameter β in utility-based asset pricing model. First, we review the distributions of RRA parameter estimate $$\hat \beta $$ . Then, a new method to the distribution of $$\hat \beta $$ is derived, and a Bayesian approach for the inference of β is proposed. Finally, empirical results are presented by using market rate of return and riskless rate data during the period December 1925 through December 2001.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 18, 2004

References

  • A Simple Econometric Approach for Utility-Based Asset Pricing Model
    Brown, D. P.; Gibbons, M. R.

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