Latent Utility Shocks in a Structural Empirical Asset Pricing Model

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Latent Utility Shocks in a Structural Empirical Asset Pricing Model

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dc.contributor.author Christensen, Bent Jesper en_US
dc.contributor.author Raahauge, Peter en_US
dc.date.accessioned 2009-02-04T10:26:11Z
dc.date.available 2009-02-04T10:26:11Z
dc.date.issued 2004-12-27T00:00:00Z en_US
dc.identifier.isbn 8790705831 en_US
dc.identifier.uri http://hdl.handle.net/10398/7135
dc.description.abstract We consider a random utility extension of the fundamental Lucas (1978) equilibrium asset pricing model. The resulting structural model leads naturally to a likelihood function. We estimate the model using U.S. asset market data from 1871 to 2000, using both dividends and earnings as state variables. We find that current dividends do not forecast future utility shocks, whereas current utility shocks do forecast future dividends. The estimated structural model produces a sequence of predicted utility shocks which provide better forecasts of future long-horizon stock market returns than the classical dividend-price ratio. KEYWORDS: Randomutility, asset pricing, maximumlikelihood, structuralmodel, return predictability en_US
dc.format.extent 36 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2004-007 en_US
dc.subject.other kep en_US
dc.title Latent Utility Shocks in a Structural Empirical Asset Pricing Model en_US
dc.type wp en_US
dc.accessionstatus modt04dec27 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort FI en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort FI en_US
dc.idnumber 8790705831 en_US
dc.publisher.city København en_US
dc.publisher.year 2004 en_US


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