Conditioning Information and Variance Bounds on Pricing Kernels

  • Geert Bekaert
  • Published 2002
Gallant, Hansen and Tauchen (1990) show how to use conditioning information optimally to construct a sharper unconditional variance bound on pricing kernels. The literature predominantly resorts to a simple but sub-optimal procedure that scales returns with predictive instruments and computes standard bounds using the original and scaled returns. This… (More)