Assessing Asset Pricing Models Using Revealed Preference

Preprint OPEN
Jonathan B. Berk; Jules H. van Binsbergen;
  • Subject:
    • jel: jel:G12 | jel:G23 | jel:D14 | jel:G00 | jel:G11 | jel:D24 | jel:G10 | jel:E22 | jel:E44 | jel:G20 | jel:G0 | jel:G1 | jel:E2 | jel:G2

We propose a new method of testing asset pricing models that relies on using quantities rather than prices or returns. We use the capital flows into and out of mutual funds to infer which risk model investors use. We derive a simple test statistic that allows us to infe... View more
  • References (9)

    10See Lustig, Van Nieuwerburgh, and Verdelhan (2013) for a discussion on the composition of the wealth portfolio and the importance of including bonds.

    Bansal, R., and A. Yaron (2004): “Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles,” The Journal of Finance, 59(4), 1481-1509.

    Berk, J. B., and R. C. Green (2004): “Mutual Fund Flows and Performance in Rational Markets,” Journal of Political Economy, 112(6), 1269-1295.

    Grossman, S. J., and J. E. Stiglitz (1980): “On the Impossibility of Informationally Efficient Markets,” The American Economic Review, 70(3), 393-408.

    Harvey, C. R., Y. Liu, and H. Zhu (2014): “. . . and the Cross-Section of Expected Returns,” Available at SSRN: or

    Sharpe, W. F. (1964): “Capital Asset Prices: A Theory of Equilibrium under Conditiona of Risk,” The Journal of Finance, 19(3), 425-442.

    Sirri, E. R., and P. Tufano (1998): “Costly Search and Mutual Fund Flows,” The Journal of Finance, 53(5), 1589-1622.

    Stambaugh, R. F. (2014): “Investment Noise and Trends,” Journal of Finance, Forthcomming.

    Thompson, S. B. (2011): “Simple formulas for standard errors that cluster by both firm and time,” Journal of Financial Economics, 99(1), 1 - 10.

  • Metrics
    No metrics available
Share - Bookmark