It's not like anyone on Wall Street gives a s**t.
What's the point of stochastic discount factor?
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All these comments are uninformed. Saying that the SDF doesn't matter is like saying that risk aversion doesn't matter.
While true, risk aversion only matters if you believe in utility functions as an accurate representation of reality
You don't need utility functions to talk about risk aversion.
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If the law of one price holds and in the absence of arbitrage, their exists an SDF that prices all assets.
There’s lots of evidence arbitrage is very difficult. So everyone is looking for the SDF.
Even if people are crazy, as long as there’s no arbitrage, there’s an SDF. It could be a “behavioral” SDF or whatever.