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Towards New Empirical Versions of Financial and Accounting Models Corrected for Measurement Errors

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Author Info

  • Francois-Éric Racicot

    ()
    (Département des sciences administratives, Université du Québec (Outaouais) et LRSP)

  • Raymond Théoret

    ()
    (Département de stratégie des affaires, Université du Québec (Montréal))

  • Alain Coen

    ()
    (Département de stratégie des affaires, Université du Québec (Montréal))

Abstract

In this paper, we propose a new empirical version of the Fama and French Model based on the Hausman (1978) specification test and aimed at discarding measurement errors in the variables. The proposed empirical framework is general enough to be used for correcting other financial and accounting models of measurement errors. Removing measurement errors is important at many levels as information disclosure, corporate governance and protection of investors.

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File URL: http://www.repad.org/ca/qc/uq/uqo/dsa/fr200603.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Département des sciences administratives, UQO in its series RePAd Working Paper Series with number UQO-DSA-wp132006.

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Length: 46 pages
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:pqs:wpaper:132006

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Related research

Keywords: Asset pricing; portfolio selection; errors in variables; measurement errors; higher moments; instrumental variables; Specification test; corporate governance; protection of investors.;

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References

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  1. Kraus, Alan & Litzenberger, Robert H, 1976. "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, American Finance Association, vol. 31(4), pages 1085-1100, September.
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  3. Lim, Kian-Guan, 1989. "A New Test of the Three-Moment Capital Asset Pricing Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 205-216, June.
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  17. Dagenais, Marcel G., 1994. "Parameter estimation in regression models with errors in the variables and autocorrelated disturbances," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 145-163.
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  23. Pal, Manoranjan, 1980. "Consistent moment estimators of regression coefficients in the presence of errors in variables," Journal of Econometrics, Elsevier, vol. 14(3), pages 349-364, December.
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Cited by:
  1. Alain Coen & Francois-Éric Racicot, 2006. "A New Approach Based on Cumulants for Estimating Financial Regression Models with Errors in the Variables: the Fama and French Model Revisited," RePAd Working Paper Series UQO-DSA-wp142006, Département des sciences administratives, UQO.

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