an:04113822
Zbl 0679.62096
Gallant, A. Ronald; Tauchen, George
Seminonparametric estimation of conditionally constrained heterogeneous processes: Asset pricing applications
EN
Econometrica 57, No. 5, 1091-1120 (1989).
00172291
1989
j
62P20 91B24
nonparametric; Hermite expansions; conditional moment restrictions; overidentifying restrictions; intertemporal capital asset pricing model; utility; specification error; limited information maximum likelihood; seminonparametric
The overidentifying restrictions of the intertemporal capital asset pricing model are usually rejected when tested using data on consumption growth and asset returns, particularly when additively separable, constant relative risk utility is attributed to the representative agent. This article investigates the extent to which specification error can explain these rejections. The empirical strategy is limited information maximum likelihood in conjunction with seminonparametric (expanding parameter space) representations for both the law of motion and utility.