Araújo, Fabio; Issler, João Victor - FGV/EPGE Escola Brasileira de Economia e Finanças, … - 2011
Using the Pricing Equation in a panel-data framework, we construct a novel consistent estimator of the stochastic discount factor (SDF) which relies on the fact that its logarithm is the "common feature" in every asset return of the economy. Our estimator is a simple function of asset returns...