Assessing Misspecified Asset Pricing Models with Empirical Likelihood Estimators

Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of admissible stochastic discount factors. We extend their fundamental contribution by considering Minimum Discrepancy projections where misspecification is measured by a family of convex functions that take into account higher moments of asset returns. A revisited version of this paper was published in the October 2012 issue of the Journal of Econometrics.