Nonparametric Euler equation identification and estimation

Juan Carlos Escanciano, Stefan Hoderlein, Arthur Lewbel, Oliver Linton and Sorawoot Srisuma

No CWP61/15, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: We consider nonparametric identification and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the first paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness). We also propose a novel nonparametric estimator based on our identification analysis, which combines standard kernel estimation with the computation of a matrix eigenvector problem. Our estimator avoids the ill-posed inverse issues associated with existing nonparametric instrumental variables based Euler equation estimators. We derive limiting distributions for our estimator and for relevant associated functionals. We provide a Monte Carlo analysis and an empirical application to US household-level consumption data.

Keywords: Euler equations; marginal utility; pricing kernel; Fredholm equations; integral equations; nonparametric identification; asset pricing (search for similar items in EconPapers)
JEL-codes: C14 D91 E21 G12 (search for similar items in EconPapers)
Date: 2015-10-01
New Economics Papers: this item is included in nep-mac, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.ifs.org.uk/uploads/cemmap/wps/cwp611515.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (https://www.ifs.org.uk/uploads/cemmap/wps/cwp611515.pdf [302 Found]--> https://ifs.org.uk/uploads/cemmap/wps/cwp611515.pdf)

Related works:
Journal Article: NONPARAMETRIC EULER EQUATION IDENTIFICATION AND ESTIMATION (2021)
Working Paper: Nonparametric Euler Equation Identification and Estimation (2020)
Working Paper: Nonparametric Euler Equation Identi?cation and Estimation (2020)
Working Paper: Nonparametric Euler equation identification and estimation (2015)
Working Paper: Nonparametric Euler Equation Identification andEstimation (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ifs:cemmap:61/15

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().