We characterize when physical probabilities, marginal utilities, and the discount rate can be recovered from observed state prices for several future time periods. Our characterization makes no assumptions of the probability distribution, thus generalizing the time-homogeneous stationary model of Ross (2015). Our characterization is simple and intuitive, linking recovery to the relation between the number of time periods and the number of states. When recovery is feasible, our model is easy to implement, allowing a closed-form linearized solution. We implement our model empirically, testing the predictive power of the recovered expected return and other recovered statistics.
|Status||Udgivet - 2016|
|Begivenhed||The 43rd European Finance Association Annual Meeting (EFA 2016) - BI Norwegian Business School, Oslo, Norge|
Varighed: 17 aug. 2016 → 20 aug. 2016
Konferencens nummer: 43
|Konference||The 43rd European Finance Association Annual Meeting (EFA 2016)|
|Lokation||BI Norwegian Business School|
|Periode||17/08/2016 → 20/08/2016|