Working Paper: NBER ID: w28140
Authors: Yacine Aït-Sahalia; Jean Jacod; Dacheng Xiu
Abstract: We develop and implement asymptotic theory to conduct inference on continuous-time asset pricing models using individual equity returns sampled at high frequencies over an increasing time horizon. We study the identification and estimation of risk premia for the continuous and jump components of risks. Our results generalize the Fama-MacBeth two-pass regression approach from the classical discrete-time factor setting to a continuous-time factor model with general dynamics for the factors, idiosyncratic components and factor loadings, while accounting for the fact that the inputs of the second-pass regression are themselves estimated in the first pass.
Keywords: No keywords provided
JEL Codes: C51; C52; C58; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market's jump risk component (G10) | market equity premia (G19) |
| jump risks in Fama-French and momentum factors (C58) | explanatory power of cross-section of expected returns (G17) |
| continuous-time factor model (C22) | estimation of risk premia (C13) |
| jump risks (G12) | equity returns (G12) |