Time-Series Tests of a Non-Expected-Utility Model of Asset Pricing

28 Pages Posted: 27 Apr 2000 Last revised: 27 Mar 2021

See all articles by Alberto Giovannini

Alberto Giovannini

Columbia University - Columbia Business School

Philippe Jorion

University of California, Irvine - Paul Merage School of Business

Date Written: December 1989

Abstract

This paper provides two alternative estimation and testing procedures of a representative-agent model of asset pricing which relies on a particular parametrization of non-expected-utility preferences. The first is based on maximum-likelihood estimates, supplemented with an explicit model of time varying first and second moments (where the time-variation of second moments in modelled with an ARCH-Autoregressive Conditionally Heteroskedastic-process); the second is based on generalized-method-of moments estimates. We perform our tests on a data set that includes monthly observations of rates of return on US stock prices and US consumption of nondurables and services. Our results are directly comparable to a test of the dynamic capital asset pricing model performed by Hansen and Singleton (1983), and to a recent test of the model studied here performed by Epstein and Zin (1989).

Suggested Citation

Giovannini, Alberto and Jorion, Philippe, Time-Series Tests of a Non-Expected-Utility Model of Asset Pricing (December 1989). NBER Working Paper No. w3195, Available at SSRN: https://ssrn.com/abstract=227300

Alberto Giovannini (Contact Author)

Columbia University - Columbia Business School ( email )

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New York, NY 10027
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Philippe Jorion

University of California, Irvine - Paul Merage School of Business ( email )

Campus Drive
Irvine, CA 92697-3125
United States
949-824-5245 (Phone)
949-824-8469 (Fax)

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