Production-based measures of risk for asset pricing

Frederico Belo

Research output: Contribution to journalArticlepeer-review

27 Scopus citations


A stochastic discount factor for asset returns is recovered from equilibrium marginal rates of transformation inferred from producers' first-order conditions. The marginal rate of transformation implies a novel macro-factor asset pricing model that does a reasonable job explaining the cross-sectional variation in average stock returns with plausible parameter values. Using a flexible representation of firms' production technology, producers' ability to transform output across states of nature is estimated to be high, in contrast with what is typically assumed in standard aggregate representations of firms' production technology.

Original languageEnglish (US)
Pages (from-to)146-163
Number of pages18
JournalJournal of Monetary Economics
Issue number2
StatePublished - Mar 2010


  • Cross-sectional asset pricing
  • Marginal rate of transformation
  • Production under uncertainty
  • Production-based asset pricing

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