Questions tagged [stochastic-discount]

Asset pricing uses the concept of a stochastic discount factor (SDF). I have read various things about it but have not seen a concrete example. Could you give a concrete example of an SDF, e.g. one that has been estimated in an academic paper or…

What is the difference between stochastic discount factor and stochastic discount factor process and how are they both related?

https://economics.stackexchange.com/questions/16115/what-is-the-equation-mathbbemr-1 The above post asks what $$\mathbb{E}[mR]=1$$ means and gets some great answers. From the first answer is seems that the physical rather than risk neutral…

This is going to be a really simple question, but I am confused by it. The basic pricing formula is $p_t=E^p_t(m_{t+1}X_{t+1})$, where $p$ is the physical measure. We can also say that $R_{t+1}=\frac{X_{t+1}}{p_{t}}$ ex-post. This is just the…