Asset Pricing and Portfolio Allocation.

• Position: NBER conference

An NBER--Universities Research Conference on "Asset Pricing and Portfolio Allocation," organized by Michael W. Brandt, University of Pennsylvania, and John C. Heaton, University of Chicago, took place in Cambridge on May 12 and 13. The program was:

Ravi Jagannathan, NBER and Northwestern University, and Zhenyu Wang, Columbia University, "Efficiency of the Stochastic Discount Factor Method for Estimating Risk Premiums"

Discussant: John H. Cochrane, NBER and University of Chicago

Mark Loewenstein, Washington University, and Gregory A. Willard, MIT, "Convergence Trades and Liquidity: A Rational Theory of Hedge Funds"

Discussant: Peter Kyle, Duke University

Blake LeBaron, NBER and Brandeis University, "Evolution and Time Horizons in an Agent-Based Stock Market"

Discussant: John Duffy, University of Pittsburgh

Darrell Duffie and Lasse Heje Pedersen, Stanford University; and Kenneth J. Singleton, NBER and Stanford University, "Modeling Sovereign Yield Spreads: A Case Study of Russian Debt"

Discussant: Pedro Santa-Clara, University of California, Los Angeles

Monika Piazzesi, Stanford University, "An Econometric Model of the Yield Curve with Macroeconomic Jump Effects"

Discussant:. Heber Farnsworth, Washington University

John Ameriks, Columbia University, and Stephen P. Zeldes, NBER and Columbia University, "How Do Household Portfolio Shares Var with Age?"

Discussant: Andrew Metrick, NBER and of Pennsylvania

Michael Kremer, NBER and Harvard University, and Paras Mehta, MIT, "Globalization and International Public Finance" (NBER Working Paper No. 7575)

Discussant: Dimitrios Vayanos, NBER and MIT

Alon Brav, Duke Uniyersity; George M. Constantinides; NBER and University of Chicago; and Christopher C. Geczy, University of Pennsylvania, "Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence" (NBER Working Paper No. 7406)

Discussant: Pierluigi Balduzzi, Boston College

The stochastic discount factor (SDF) method provides an elegant and unified general framework for econometric analysis of linear and nonlinear asset pricing models, including derivative pricing models. But Jagannathan and Wang ask whether the generality of the SDF methodology comes at a cost in estimation efficiency. They show that for linear beta pricing models, the SDF method provides estimates of factor risk premiums that are as precise as those obtained using classical regression methods. In the special case where the mean and variance of the factors...