Nicola Borri and Giuseppe Ragusa, “Sensitivity, Moment Conditions, and the Risk-free Rate in Yogo (2006).” Critical Review of Finance, 6(2):281-293


 download pdf

In this paper we show that results presented in the seminal paper by Yogo, A Consumption Based Explanation of Expected Stock Returns, cannot be replicated. We find different estimates for the parameters and we obtain values of over-identified statistics that being much larger than those in the original paper indicate rejection of the durable consumption asset pricing model. By careful inspection of Yogo’s replication files, we were able to track down the inconsistency to a coding bug. The rejection of the durable model is exemplified by its inability to simultaneously explain the risk-free rate and excess stock returns.

« Existence and Characterization of Conditional Density Projections | Publications List | Anchoring the Yield Curve Using Survey Expectations »


I teach economics at the University of Pisa (Department of Economics and Management).


Department of Economics and Management
University of Pisa
Via Cosimo Ridolfi 10
56124 Pisa (PI)


To receive updates from this site, you can subscribe to the  RSS feed of all updates to the site in an RSS feed reader