This essay argues that neuroeconomic research on financial decisions should attempt to focus on standard models that relate to the behavior being studied. It particular, it argues that a key organizing concept for such research should be the stochastic discount factor. Focusing on such models...

We examine the pricing performance of out-of-sample pricing factors in the broad cross-section of currency returns. To this end, we develop a methodology for estimating empirical minimum-dispersion stochastic discount factors (SDFs) under constraints on maximum position leverage. Under leverage...

I explore methods that characterize model-based valuation of stochastically growing cash flows. Following previous research, I use stochastic discount factors as a convenient device to depict asset values. I extend that literature by focusing on the impact of compounding these discount factors...

This paper examines the applicability of the bootstrap approach to test for irrelevant risk factors that are potentially useless in misspecified linear stochastic discount factor (SDF) models. In the literature, the misspecification-robust inference with useless factors is known to give rise...