A Simple, Consistent Estimator For Disturbance Components In Financial Models
Many recent papers have estimated components of the disturbance term in the "market model" of equity returns. In particular, several studies of regulatory changes and other policy events have decomposed the event effects in order to allow for heterogeneity across firms. In this paper we demonstrate that the econometric method applied in some papers yields biased and inconsistent estimates of the model parameters. We demonstrate the consistency of a simple and easily-implemented alternative method.
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|Date of creation:||1989|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.|
Web page: http://www.iies.su.se/
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- V. Vance Roley & Douglas K. Pearce, 1988.
"Firm characteristics, unanticipated inflation, and stock returns,"
Research Working Paper
88-01, Federal Reserve Bank of Kansas City.
- Pearce, Douglas K & Roley, V Vance, 1988. " Firm Characteristics, Unanticipated Inflation, and Stock Returns," Journal of Finance, American Finance Association, vol. 43(4), pages 965-81, September.
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- Michael C. Jensen, 1972. "Capital Markets: Theory and Evidence," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 357-398, Autumn.
- Jeffrey MacKie-Mason, 1988.
"Do Taxes Affect Corporate Financing Decisions?,"
NBER Working Papers
2632, National Bureau of Economic Research, Inc.
- Grossman, Gene M & Levinsohn, James A, 1989.
"Import Competition and the Stock Market Return to Capital,"
American Economic Review,
American Economic Association, vol. 79(5), pages 1065-87, December.
- Gene M. Grossman & James A. Levinsohn, 1987. "Import Competition and the Stock Market Return to Capital," NBER Working Papers 2420, National Bureau of Economic Research, Inc.
- French, Kenneth R & Ruback, Richard S & Schwert, G William, 1983. "Effects of Nominal Contracting on Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 70-96, February.
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