Applicability of the Generalized Method of Moments to Tests of the Intertemporal capital Asset Pricing Models

Abstract

Since their first derivation, the continuous-time Intertemporal Capital Asset Pricing Models have encountered substantial problems in empirical tests. Hansen and Singleton (1982) have suggested to use the generalized method of moments to estimate and test the discrete-time expected utility maximization Euler equations. This method provides a test of a composite hypotesis of the model and of the specified type of preferences and strong-consistent, asim-protically normally distributed estimators.