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Nonlinear Pricing Kernels, Kurtosis Preference, and Evidence from the Cross Section of Equity Returns

Dittmar, Robert F.·2002·The Journal of Finance
DOI 10.1111/1540-6261.00425
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Abstract

This paper investigates nonlinear pricing kernels in which the risk factor is endogenously determined and preferences restrict the definition of the pricing kernel. These kernels potentially generate the empirical performance of nonlinear and multifactor models, while maintaining empirical power and avoiding ad hoc specifications of factors or functional form. Our test results indicate that preference‐restricted nonlinear pricing kernels are both admissible for the cross section of returns and are able to significantly improve upon linear single‐ and multifactor kernels. Further, the nonlinearities in the pricing kernel drive out the importance of the factors in the linear multi‐factor model.

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Metadata

Authors
Dittmar, R. F.
Venue
The Journal of Finance
Publisher
Wiley
Published
2002-02
Volume
57
Issue
1
Pages
369-403
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/1540-6261.00425
OpenAlex
W2110521063
Cited by
838
References
2
FWCI
36.61
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor, 319 d)

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CoChat. (2026). Citation check: Nonlinear Pricing Kernels, Kurtosis Preference, and Evidence from the Cross Section of Equity Returns. https://app.cochat.ai/papers/10.1111/1540-6261.00425
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Dittmar, R. F. (2002). Nonlinear Pricing Kernels, Kurtosis Preference, and Evidence from the Cross Section of Equity Returns. The Journal of Finance. https://doi.org/10.1111/1540-6261.00425

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