TY - RPRT A1 - Grammig, Joachim A1 - Küchlin, Eva-Maria T1 - A two-step indirect inference approach to estimate the long-run risk asset pricing model N2 - The long-run consumption risk model provides a theoretically appealing explanation for prominent asset pricing puzzles, but its intricate structure presents a challenge for econometric analysis. This paper proposes a two-step indirect inference approach that disentangles the estimation of the model's macro-economic dynamics and the investor's preference parameters. A Monte Carlo study explores the feasibility and efficiency of the estimation strategy. We apply the method to recent U.S.\data and provide a critical re-assessment of the long-run risk model's ability to reconcile the real economy and financial markets. This two-step indirect inference approach is potentially useful for the econometric analysis of other prominent consumption-based asset pricing models that are equally difficult to estimate. KW - indirect inference estimation KW - asset pricing KW - long-run risk Y1 - 2017 UR - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/43872 UR - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-438725 IS - May 27, 2017 SP - 0 EP - 72 ER -