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2
votes
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Stochastic discount factor (aka deflator or pricing kernel) and class D processes
When (under what assumptions on the model) does a Stochastic Discount Factor need to be of Class D? What would be the implications if it was not? Is it connected to one of the no-arbitrage notions?
6
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Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?
Arbitrage pricing theory states that expected returns for a security are linear combination of exposures to risk factors and the returns on these risk factors. Betas, or the exposures of the security ...
