A note on Bayesian inference in asset pricing

In this paper the authors extend results by Harvey and Zhou (1990, Journal of Financial Econometrics 26, 221-254) and Kandel, McCulloch, and Stambaugh (1995, Review of Financial Studies 8(1), 1-53) to derive the posterior dis tribution of a key parameter in a Bayesian analysis of asset pricing models . It is shown that this distribution depends upon the same terms that const itute the standard asset pricing test of Jobson and Korkie (1985, Canadian Journal of Administrative Science 12, 114-138). Contrary to the view held b y other authors, we find straightforward expressions for the posterior dist ribution that can be calculated without resorting to Monte Carlo methods.