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Asymptotic variance approximations for invariant estimators in uncertain asset-pricing models
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Gospodinov, Nikolay, Kan, Raymond and Robotti, Cesare (2018) Asymptotic variance approximations for invariant estimators in uncertain asset-pricing models. Econometric Reviews, 37 (7). pp. 695-718. doi:10.1080/07474938.2016.1165945 ISSN 0747-4938.
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Official URL: https://doi.org/10.1080/07474938.2016.1165945
Abstract
This article derives explicit expressions for the asymptotic variances of the maximum likelihood and continuously-updated GMM estimators in models that may not satisfy the fundamental asset-pricing restrictions in population. The proposed misspecification-robust variance estimators allow the researcher to conduct valid inference on the model parameters even when the model is rejected by the data. While the results for the maximum likelihood estimator are only applicable to linear asset-pricing models, the asymptotic distribution of the continuously-updated GMM estimator is derived for general, possibly nonlinear, models. The large corrections in the asymptotic variances, that arise from explicitly incorporating model misspecification in the analysis, are illustrated using simulations and an empirical application.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Capital assets pricing model, Asymptotic distribution (Probability theory), Moments method (Statistics), Estimation theory, Econometric models | ||||||||||
Journal or Publication Title: | Econometric Reviews | ||||||||||
Publisher: | Taylor & Francis Inc. | ||||||||||
ISSN: | 0747-4938 | ||||||||||
Official Date: | 2018 | ||||||||||
Dates: |
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Volume: | 37 | ||||||||||
Number: | 7 | ||||||||||
Page Range: | pp. 695-718 | ||||||||||
DOI: | 10.1080/07474938.2016.1165945 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 9 July 2018 | ||||||||||
Date of first compliant Open Access: | 29 November 2018 | ||||||||||
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