Efficient Estimation Using the Characteristic Function
The method of moments proposed by Carrasco and Florens (2000) permits to fully exploit the information contained in the characteristic function and yields an estimator which is asymptotically as efficient as the maximum likelihood estimator. However, this estimation procedure depends on a regularization or tuning parameter \alpha that needs to be selected. The aim of the present paper is to provide a way to optimally choose \alpha by minimizing the approximate mean square error (AMSE) of the estimator. Following an approach similar to that of Newey and Smith (2004), we derive a higher-order expansion of the estimator from which we characterize the fi nite sample dependence of the AMSE on \alpha . We provide a data-driven procedure for selecting the regularization parameter that relies on parametric bootstrap. We show that this procedure delivers a root T consistent estimator of \alpha. Moreover, the data-driven selection of the regularization parameter preserves the consistency, asymptotic normality and efficiency of the CGMM estimator. Simulation experiments based on a CIR model show the relevance of the proposed approach.
|Date of creation:||30 Sep 2013|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00867850|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
- Peter C. B. Phillips & Hyungsik R. Moon, 1999.
"Linear Regression Limit Theory for Nonstationary Panel Data,"
Econometric Society, vol. 67(5), pages 1057-1112, September.
- Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation for Research in Economics, Yale University.
- Carrasco, Marine, 2012. "A regularization approach to the many instruments problem," Journal of Econometrics, Elsevier, vol. 170(2), pages 383-398.
- Jiang, George J & Knight, John L, 2002. "Estimation of Continuous-Time Processes via the Empirical Characteristic Function," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 198-212, April.
- Linton, Oliver, 2002. "Edgeworth approximations for semiparametric instrumental variable estimators and test statistics," Journal of Econometrics, Elsevier, vol. 106(2), pages 325-368, February.
- Oliver Linton, 2000. "Edgeworth approximations for semiparametric instrumental variable estimators and test statistics," LSE Research Online Documents on Economics 2156, London School of Economics and Political Science, LSE Library.
- Oliver Linton, 2000. "Edgeworth Approximations for Semiparametric Instrumental Variable Estimators and Test Statistics," STICERD - Econometrics Paper Series 399, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Koenker, Roger & Machado, José A.F. & Skeels, Christopher L. & Welsh, Alan H., 1994. "Momentary Lapses: Moment Expansions and the Robustness of Minimum Distance Estimation," Econometric Theory, Cambridge University Press, vol. 10(01), pages 172-197, March.
- Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
- Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
- Jacho-Chávez, David Tomás, 2010. "Optimal Bandwidth Choice For Estimation Of Inverse Conditional–Density–Weighted Expectations," Econometric Theory, Cambridge University Press, vol. 26(01), pages 94-118, February.
- Pascal Lavergne & Valentin Patilea, 2008. "Smooth Minimum Distance Estimation and Testing in Conditional Moment Restrictions Models: Uniform in Bandwidth Theory," Discussion Papers dp08-08, Department of Economics, Simon Fraser University.
- Carrasco, Marine & Florens, Jean-Pierre, 2000. "Generalization Of Gmm To A Continuum Of Moment Conditions," Econometric Theory, Cambridge University Press, vol. 16(06), pages 797-834, December.
- Ai[diaeresis]t-Sahalia, Yacine & Kimmel, Robert, 2007. "Maximum likelihood estimation of stochastic volatility models," Journal of Financial Economics, Elsevier, vol. 83(2), pages 413-452, February. Full references (including those not matched with items on IDEAS)