This paper presents a general statistical framework for estimation, testing, and comparison of asset pricing models using the unconstrained distance measure of Hansen and Jagannathan (1997). The limiting results cover both linear and nonlinear models that could be correctly specified or...

This paper presents a general statistical framework for estimation, testing and comparison of asset pricing models using the unconstrained distance measure of Hansen and Jagannathan (1997). The limiting results cover both linear and nonlinear models that could be correctly specified or...

This paper considers two alternative formulations of the linear factor model (LFM) with nontraded factors. The first formulation is the traditional LFM, where the estimation of risk premia and alphas is performed by means of a cross-sectional regression of average returns on betas. The second...

Building on the Shanken (1992) estimator, we develop a new methodology for estimating and testing beta-pricing models when a large number of assets N is available but the number of time-series observations is small. We show empirically that our large N framework can change substantially common...