The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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DISCUSSION
Published: 05/01/1983 | DOI: 10.1111/j.1540-6261.1983.tb02278.x
MICHAEL R. GIBBONS
A Simple Econometric Approach for Utility‐Based Asset Pricing Models
Published: 06/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04962.x
DAVID P. BROWN, MICHAEL R. GIBBONS
Utility‐based models of asset pricing may be estimated with or without assuming a distribution for security returns; both approaches are developed and compared here. The chief strength of a parametric estimator lies in its computational simplicity and statistical efficiency when the added distributional assumption is true. In contrast, the nonparametric estimator is robust to departures from any particular distribution, and it is more consistent with the spirit underlying utility‐based asset pricing models since the distribution of asset returns remains unspecified even in the empirical work. The nonparametric approach turns out to be easy to implement with precision nearly indistinguishable from its parametric counterpart in this particular application. The application shows that log utility is consistent with the data over the period 1926–1981.
Empirical Tests of the Consumption‐Oriented CAPM
Published: 06/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb05056.x
DOUGLAS T. BREEDEN, MICHAEL R. GIBBONS, ROBERT H. LITZENBERGER
The empirical implications of the consumption‐oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and the CCAPM are about the same.