Liu, Xiaoquan and Brennan, Michael John and Xia, Yihong (2006) Option Pricing Kernels and the Icapm. Working Paper. Elsevier BV.
Liu, Xiaoquan and Brennan, Michael John and Xia, Yihong (2006) Option Pricing Kernels and the Icapm. Working Paper. Elsevier BV.
Liu, Xiaoquan and Brennan, Michael John and Xia, Yihong (2006) Option Pricing Kernels and the Icapm. Working Paper. Elsevier BV.
Abstract
<jats:p>We estimate the parameters of pricing kernels that depend on both aggregate wealth and state variables that describe the investment opportunity set, using FTSE 100 and S&P 500 index option returns as the returns to be priced. The coefficients of the state variables are highly significant and remarkably consistent across specifications of the pricing kernel, and across the two markets. The results provide further evidence that, consistent with Merton's (1973) Intertemporal Capital Asset Pricing Model, state variables in addition to market risk are priced.</jats:p>
| Item Type: | Monograph (Working Paper) |
|---|---|
| Subjects: | H Social Sciences > H Social Sciences (General) |
| Divisions: | Faculty of Arts, Humanities and Social Sciences > Essex Business School |
| SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
| Depositing User: | Unnamed user with email elements@essex.ac.uk |
| Date Deposited: | 11 Sep 2014 09:05 |
| Last Modified: | 14 Aug 2026 14:55 |
| URI: | http://repository.essex.ac.uk/id/eprint/10067 |
Available files
Filename: SSRN-id917911.pdf