Kozak, Nagel, and Santosh constructed a stochastic-discount-factor model, which pins down the factors that allow investors to earn a return premium—to analyze the predictive power of a large number of ...

Standard asset pricing models reconcile high equity premia with smooth risk-free rates by inducing an inverse functional relationship between the mean and the variance of the stochastic discount ...

Standard asset pricing models reconcile high equity premia with smooth risk-free rates by inducing an inverse functional relationship between the mean and the variance of the stochastic discount ...

This behavior leads to a non-linear stochastic discount factor, so that the impact of monetary policy on the discount rate varies with changes in the yield curve factors. In addition, tightening of ...

To address this concern, they harness the distinctive property of the stochastic discount factor when a risk-free rate exists, offering a more robust testing approach. A significant revelation from ...

Markov decision processes (MDPs) and stochastic control constitute pivotal ... relative value functions converge continuously as discount factors tend to unity, hence legitimising the use of ...

We study changes in risk taking behavior in a low interest rate environment by estimating a market stochastic discount factor that is non-linear and therefore consistent with the empirical properties ...