The Exact Distribution of the Hansen-Jagannathan Bound

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Title: The Exact Distribution of the Hansen-Jagannathan Bound
Authors: Kan, R
Robotti, C
Item Type: Journal Article
Abstract: Under the assumption of multivariate normality of asset returns, this paper presents a geometric interpretation and the finite-sample distributions of the sample Hansen–Jagannathan bounds on the variance of admissible stochastic discount factors, with and without the nonnegativity constraint on the stochastic discount factors. In addition, since the sample Hansen–Jagannathan bounds can be very volatile, we propose a simple method to construct confidence intervals for the population Hansen–Jagannathan bounds. Finally, we show that the analytical results in the paper are robust to departures from the normality assumption.
Issue Date: 12-Nov-2015
Date of Acceptance: 29-Mar-2015
URI: http://hdl.handle.net/10044/1/39988
DOI: http://dx.doi.org/10.1287/mnsc.2015.2222
ISSN: 1526-5501
Publisher: INFORMS
Start Page: 1915
End Page: 1943
Journal / Book Title: Management Science
Volume: 62
Issue: 7
Copyright Statement: © 2016 INFORMS
Keywords: Social Sciences
Science & Technology
Technology
Management
Operations Research & Management Science
Business & Economics
Hansen-Jagannathan bounds
finite-sample distributions
maximum likelihood estimators
in-sample arbitrage portfolios
ASSET-PRICING-MODELS
STOCHASTIC DISCOUNT FACTOR
CONDITIONING INFORMATION
MILLS RATIO
RETURNS
RATES
PORTFOLIO
MARKETS
TESTS
Operations Research
08 Information And Computing Sciences
15 Commerce, Management, Tourism And Services
Publication Status: Published
Appears in Collections:Imperial College Business School



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