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Efficient Estimation of Conditional Asset Pricing Models

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A semiparametric efficient estimation procedure is developed for the parameters of multivariate GARCH-in-mean models when the disturbances have a distribution that is assumed to be elliptically symmetric but is otherwise unrestricted. Under high level restrictions, the resulting estimator achieves the asymptotic semiparametric efficiency bound. The elliptical symmetry assumption allows us to avert the curse of dimensionality problem that would otherwise arise in estimating the unknown error distribution. This framework is suitable for the estimation and testing of conditional asset pricing models such as the conditional CAPM, and we apply our estimator in an empirical study of stock prices, with Monte Carlo simulation results also being reported. Nous développons un nouvel estimateur pour les paramètres d'un modèle de GARCH en moyenne (" GARCH-M ") avec plusieurs variables. L'estimateur a l'efficacité semiparamétrique quand les erreurs suivent une loi de probabilité qui est elliptiquement symétrique mais n'aucune autre restriction. Sous les hypothèses de haut niveau, notre estimateur obtient la limite d'efficacité semiparamétrique. L'hypothèse de la symétrie elliptique nous permet d'éviter le problème d'estimer non-paramétriquement une fonction de haut dimension, parce qu'on peut écrire la densité d'un loi elliptique comme un fonction d'une transformation unidimensionnelle de la variable aléatoire multidimensionnelle. Ce cadre est approprié pour analyser des modèles conditionnels des prix des actifs financiers, comme le CAPM conditionnel. Nous appliquons notre méthodologie à l'étude des prix des actions, et nous rendons compte des résultats d'une étude simulation "Monte-Carlo".

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Bibliographic Info

Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 144.

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Length: 39 pages
Date of creation: Oct 2001
Date of revision:
Handle: RePEc:cre:crefwp:144

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Keywords: Capital asset pricing model; elliptical symmetry; semiparametric efficiency; GARCH.;

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References

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Citations

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Cited by:
  1. Rombouts, Jeroen V. K. & Hafner, Christian M., 2004. "Semiparametric multivariate volatility models," Papers 2004,14, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  2. BEAULIEU, Marie-Claude & DUFOUR, Jean-Marie & KHALAF, Lynda, 2005. "Exact Multivariate Tests of Asset Pricing Models with Stable Asymmetric Distributions," Cahiers de recherche 2005-04, Universite de Montreal, Departement de sciences economiques.
  3. Amengual, Dante & Fiorentini, Gabriele & Sentana, Enrique, 2013. "Sequential estimation of shape parameters in multivariate dynamic models," Journal of Econometrics, Elsevier, vol. 177(2), pages 233-249.
  4. Beaulieu, Marie-Claude & Dufour, Jean-Marie & Khalaf, Lynda, 2010. "Asset-pricing anomalies and spanning: Multivariate and multifactor tests with heavy-tailed distributions," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 763-782, September.
  5. Christensen, Bent Jesper & Dahl, Christian M. & Iglesias, Emma M., 2012. "Semiparametric inference in a GARCH-in-mean model," Journal of Econometrics, Elsevier, vol. 167(2), pages 458-472.
  6. Keith Vorkink & Douglas J. Hodgson & Oliver Linton, 2002. "Testing the capital asset pricing model efficiently under elliptical symmetry: a semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(6), pages 617-639.
  7. Gabriele Fiorentini & Enrique Sentana, 2009. "Dynamic Specification Tests For Static Factor Models," Working Papers wp2009_0912, CEMFI.
  8. Gabriele Fiorentini & Enrique Sentana, 2007. "On the efficiency and consistency of likelihood estimation in multivariate conditionally heteroskedastic dynamic regression models," Working Paper Series 38-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  9. Vitali Alexeev & Alex Maynard, 2010. "Localized Level Crossing Random Walk Test Robust to the Presence of Structural Breaks," Working Papers 1001, University of Guelph, Department of Economics and Finance.
  10. Gabriele Fiorentini & Enrique Sentana, 2012. "Tests For Serial Dependence In Static, Non-Gaussian Factor Models," Working Papers wp2012_1211, CEMFI.
  11. Douglas Hodgson & Barrett Slade & Keith Vorkink, 2006. "Constructing Commercial Indices: A Semiparametric Adaptive Estimator Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 151-168, March.

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