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Using Samples of Unequal Length in Generalized Method of Moments Estimation

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  • Lynch, Anthony W.
  • Wachter, Jessica A.

Abstract

This paper describes estimation methods, based on the generalized method of moments (GMM), applicable in settings where time series have different starting or ending dates. We introduce two estimators that are more efficient asymptotically than standard GMM. We apply these to estimating predictive regressions in international data and show that the use of the full sample affects inference for assets with data available over the full period as well as for assets with data available for a subset of the period. Monte Carlo experiments demonstrate that reductions hold for small-sample standard errors as well as asymptotic ones.

Suggested Citation

  • Lynch, Anthony W. & Wachter, Jessica A., 2013. "Using Samples of Unequal Length in Generalized Method of Moments Estimation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(1), pages 277-307, February.
    • Handle: RePEc:cup:jfinqa:v:48:y:2013:i:01:p:277-307_00
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    Cited by:

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    2. Avdis, Efstathios & Wachter, Jessica A., 2017. "Maximum likelihood estimation of the equity premium," Journal of Financial Economics, Elsevier, vol. 125(3), pages 589-609.
    3. Jonathan Fletcher & Patricia Ntozi-Obwale, 2009. "Exploring the Conditional Performance of U.K. Unit Trusts," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(1), pages 21-44, August.
    4. Yiying Cheng & Yaozhong Hu & Hongwei Long, 2020. "Generalized moment estimators for $$\alpha $$α-stable Ornstein–Uhlenbeck motions from discrete observations," Statistical Inference for Stochastic Processes, Springer, vol. 23(1), pages 53-81, April.
    5. Efstathios Avdis & Jessica A. Wachter, 2013. "Maximum likelihood estimation of the equity premium," NBER Working Papers 19684, National Bureau of Economic Research, Inc.
    6. Sönksen, Jantje & Grammig, Joachim, 2021. "Empirical asset pricing with multi-period disaster risk: A simulation-based approach," Journal of Econometrics, Elsevier, vol. 222(1), pages 805-832.
    7. Barras, Laurent & Malkhozov, Aytek, 2016. "Does variance risk have two prices? Evidence from the equity and option markets," Journal of Financial Economics, Elsevier, vol. 121(1), pages 79-92.
    8. Martin M. Andreasen & Tom Engsted & Stig V. Møller & Magnus Sander, 2016. "Bond Market Asymmetries across Recessions and Expansions: New Evidence on Risk Premia," CREATES Research Papers 2016-26, Department of Economics and Business Economics, Aarhus University.
    9. Laurent Barras & Aytek Malkhozov, 2015. "Does variance risk have two prices? Evidence from the equity and option markets," BIS Working Papers 521, Bank for International Settlements.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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