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Publications [#266065] of Ravi Bansal

Journal Articles

  1. Bansal, R; Lehmann, BN, Growth-optimal portfolio restrictions on asset pricing models, Macroeconomic Dynamics, vol. 1 no. 2 (January, 1997), pp. 333-354, ISSN 1365-1005 [doi]
    (last updated on 2021/10/21)

    We show that absence of arbitrage in frictionless markets implies a lower bound on the average of the logarithm of the reciprocal of the stochastic discount factor implicit in asset pricing models. The greatest lower bound for a given asset menu is the average continuously compounded return on its growth-optimal portfolio. We use this bound to evaluate the plausibility of various parametric asset pricing models to characterize financial market puzzles such as the equity premium puzzle and the risk-free rate puzzle. We show that the insights offered by the growth-optimal bounds differ substantially from those obtained by other nonparametric bounds.

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