The Pricing Kernel Puzzle in Forward Looking Data

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CUESDEANU, Horatio, Jens Carsten JACKWERTH, 2016. The Pricing Kernel Puzzle in Forward Looking Data

@techreport{Cuesdeanu2016Prici-36294, title={The Pricing Kernel Puzzle in Forward Looking Data}, year={2016}, author={Cuesdeanu, Horatio and Jackwerth, Jens Carsten} }

2016 The Pricing Kernel Puzzle in Forward Looking Data Jackwerth, Jens Carsten eng The pricing kernel puzzle concerns the locally increasing empirical pricing kernel, which is inconsistent with a risk-averse representative investor in a single period, single state variable setting. Some recent papers worry that the puzzle is caused simply by the mismatch of backward looking subjective and forward looking risk-neutral distributions of index returns. By using a novel test and forward looking information only, we generally con rm the existence of a u-shaped pricing kernel puzzle in the S&P 500 options data. The evidence is weaker for tests against an alternative with a risk-neutral investor and for longer horizons. Cuesdeanu, Horatio 2016-12-13T13:18:51Z terms-of-use 2016-12-13T13:18:51Z Cuesdeanu, Horatio Jackwerth, Jens Carsten

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