Using Irregularly Spaced Returns to Estimate Multi-Factor Models: Application to Brazilian Equity Data
AbstractMulti-factor models are useful tools to explain cross-sectional covariance in equities returns. In this paper a new estimation method is proposed that makes use of irregularly spaced returns and an empirical example is provided with the 389 most liquid equities in the Brazilian Market. The market index shows itself capable of explaining equity returns while the US$/Brazilian real exchange rate and the Brazilian short interest rate do not. The example shows the usefulness of the estimation method in further using the model to fill in missing values and to provide interval forecasts.
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Bibliographic InfoPaper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 487.
Date of creation: 30 Jun 2003
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- Alvaro Veiga & Leonardo Souza, 2006. "Using Irregularly Spaced Returns to Estimate Multi-factor Models: Application to Brazilian Equity Data," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 605-626.
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