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On the consistency of a cross-sectional GMM estimator in the presence of an observable stochastic common data shock

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  • Khovansky, Serguey
  • Zhylyevskyy, Oleksandr

Abstract

A standard version of Generalized Method of Moment (GMM) is inconsistent when applied to cross-sectional data that are strongly dependent due to an observed stochastic non-localized common shock. We suggest a modification of GMM and prove its consistency when such a shock affects the data.

Suggested Citation

  • Khovansky, Serguey & Zhylyevskyy, Oleksandr, 2017. "On the consistency of a cross-sectional GMM estimator in the presence of an observable stochastic common data shock," Statistics & Probability Letters, Elsevier, vol. 129(C), pages 196-202.
    • Handle: RePEc:eee:stapro:v:129:y:2017:i:c:p:196-202
    DOI: 10.1016/j.spl.2017.05.017
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    References listed on IDEAS

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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Khovansky, Serguey & Zhylyevskyy, Oleksandr, 2013. "Impact of idiosyncratic volatility on stock returns: A cross-sectional study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 3064-3075.
    3. Donald W. K. Andrews, 2005. "Cross-Section Regression with Common Shocks," Econometrica, Econometric Society, vol. 73(5), pages 1551-1585, September.
    4. B. Prakasa Rao, 2009. "Conditional independence, conditional mixing and conditional association," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 61(2), pages 441-460, June.
    5. Newey, Whitney K, 1991. "Uniform Convergence in Probability and Stochastic Equicontinuity," Econometrica, Econometric Society, vol. 59(4), pages 1161-1167, July.
    6. Andrews, Donald W.K., 1992. "Generic Uniform Convergence," Econometric Theory, Cambridge University Press, vol. 8(2), pages 241-257, June.
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    Cited by:

    1. Serguey Khovansky, 2018. "Cross-Sectional Data with a Common Shock and Generalized Method of Moments," Biostatistics and Biometrics Open Access Journal, Juniper Publishers Inc., vol. 5(5), pages 151-152, March.

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