02336cam a22002657 4500001000600000003000500006005001700011008004100028100002100069245012600090260006600216490004100282500001900323520105000342530006101392538007201453538003601525690011201561690018601673700002001859710004201879830007601921856003701997856003602034w8789NBER20160525152004.0160525s2002 mau||||fs|||| 000 0 eng d1 aFerson, Wayne E.10aStochastic Discount Factor Bounds with Conditioning Informationh[electronic resource] /cWayne E. Ferson, Andrew Siegel. aCambridge, Mass.bNational Bureau of Economic Researchc2002.1 aNBER working paper seriesvno. w8789 aFebruary 2002.3 aHansen and Jagannathan (HJ, 1991) describe restrictions on the volatility of stochastic discount factors (SDFs) that price a given set of asset returns. This paper compares the sampling properties of different versions of HJ bounds that use conditioning information in the form of a given set of lagged instruments. HJ describe one way to use conditioning information. Their approach is to multiply the original returns by the lagged variables, and much of the asset pricing literature to date has followed this ihmultiplicativel. approach. We also study two versions of optimized HJ bounds with conditioning information. One is from Gallant, Hansen and Tauchen (1990) and the second is based on the unconditionally-efficient portfolios derived in Ferson and Siegel (2000). We document finite-sample biases in the HJ bounds, where the biased bounds reject asset-pricing models too often. We provide useful correction factors for the bias. We also evaluate the asymptotic standard errors for the HJ bounds, from Hansen, Heaton and Luttmer (1995). aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aG12 - Asset Pricing • Trading Volume • Bond Interest Rates2Journal of Economic Literature class. 7aC31 - Cross-Sectional Models • Spatial Models • Treatment Effect Models • Quantile Regressions • Social Interaction Models2Journal of Economic Literature class.1 aSiegel, Andrew.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w8789.4 uhttp://www.nber.org/papers/w878941uhttp://dx.doi.org/10.3386/w8789