Working Paper
The exact distribution of the Hansen-Jagannathan bound
Abstract: Under the assumption of multivariate normality of asset returns, this paper presents a geometrical interpretation and the finite-sample distributions of the sample Hansen-Jagannathan (1991) bounds on the variance of admissible stochastic discount factors, with and without the nonnegativity constraint on the stochastic discount factors. In addition, since the sample Hansen-Jagannathan bounds can be very volatile, we propose a simple method to construct confidence intervals for the population Hansen-Jagannathan bounds. Finally, we show that the analytical results in the paper are robust to departures from the normality assumption.
Access Documents
File(s):
File format is application/pdf
https://fraser.stlouisfed.org/title/working-papers-federal-reserve-bank-atlanta-8586/exact-distribution-hansen-jagannathan-bound-656952
Description: Full text
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2008
Number: 2008-09