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Imputation Methods for Incomplete Dependent Variables in Finance

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Author Info
Paul Kofman (University of Technology)
Ian Sharpe (University of New South Wales)
Abstract

Missing observations in dependent variables is a common feature of many financial applications. Standard ad hoc missing value imputation methods invariably fail to deliver efficient and unbiased parameter estimates. A number of recently developed classical and Bayesian iterative methods are evaluated for the treatment of missing dependent variables when the independent variables are completely observed. These methods are compared by simulation to commonly applied alternative missing data methodologies in the finance literature. The methods are then applied to a system of simultaneous equations modelling the maturity, secured status, and pricing of U.S. bank revolving loan contracts. Two of the four dependent variables in this application are characterised by severe missingness. The system of equations approach allows us to also exploit the additional information contained in the interdependencies among these features. The results indicate that proper treatment of missingness can be important for many financial applications.

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File URL: http://fmwww.bc.edu/RePEc/es2000/0409.pdf
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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0409.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0409

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  1. Stohs, Mark Hoven & Mauer, David C, 1996. "The Determinants of Corporate Debt Maturity Structure," Journal of Business, University of Chicago Press, vol. 69(3), pages 279-312, July. [Downloadable!] (restricted)
  2. Nelson, Forrest & Olson, Lawrence, 1978. "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 695-709, October. [Downloadable!] (restricted)
  3. Guedes, Jose & Opler, Tim, 1996. " The Determinants of the Maturity of Corporate Debt Issues," Journal of Finance, American Finance Association, vol. 51(5), pages 1809-33, December. [Downloadable!] (restricted)
  4. Todd C. Pulvino, 1998. "Do Asset Fire Sales Exist? An Empirical Investigation of Commercial Aircraft Transactions," Journal of Finance, American Finance Association, vol. 53(3), pages 939-978, 06. [Downloadable!] (restricted)
  5. Melnik, Arie & Plaut, Steven, 1986. " Loan Commitment Contracts, Terms of Lending, and Credit Allocation," Journal of Finance, American Finance Association, vol. 41(2), pages 425-35, June. [Downloadable!] (restricted)
  6. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  7. Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-31, June. [Downloadable!] (restricted)
  8. Dennis, Steven & Nandy, Debarshi & Sharpe, Lan G., 2000. "The Determinants of Contract Terms in Bank Revolving Credit Agreements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(01), pages 87-110, March. [Downloadable!]
  9. Berger, Allen N. & Udell, Gregory F., 1990. "Collateral, loan quality and bank risk," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 21-42, January. [Downloadable!] (restricted)
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  1. Andrew Patton, 2001. "Estimation of Copula Models for Time Series of Possibly Different Length," University of California at San Diego, Economics Working Paper Series 2001-17, Department of Economics, UC San Diego. [Downloadable!]
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