A two-step indirect inference approach to estimate the long-run risk asset pricing model
长期风险资产定价模型的两步间接推断估计
The long-run consumption risk model provides a theoretically appealing explanation for prominent asset pricing puzzles, but its intricate structure presents a challenge for econometric analysis. This paper proposes a two-step indirect inference approach that disentangles the estimation of the model’s macro-economic dynamics and the investor’s preference parameters. A Monte Carlo study explores the feasibility and efficiency of the estimation strategy. We apply the method to…