Empirical Dynamic Asset Pricing: Model Specification and Econometric Assessment

By Kenneth J. Singleton | Go to book overview

2
Model Specification and
Estimation Strategies

A DAPM MAY: (1) provide a complete characterization of the joint distribution of all of the variables being studied; or (2) imply restrictions on some moments of these variables, but not reveal the form of their joint distribution. A third possibility is that there is not a well-developed theory for the joint distribution of the variables being studied. Which of these cases obtains for the particular DAPM being studied determines the feasible estimation strategies; that is, the feasible choices of D in the definition of an estimation strategy. This chapter introduces the maximum likelihood (ML), generalized method of moments (GMM), and linear least-squares projection (LLP) estimators and begins our development of the interplay between model formulation and the choice of an estimation strategy discussed in Chapter 1.


2.1. Full Information about Distributions

Suppose that a DAPM yields a complete characterization of the joint distribution of a sample of size T on a vector of variables

denote the family of joint density functions of implied by the DAPM and indexed by the K-dimensional parameter vector β. Suppose further that the admissible parameter space associated with this DAPM is Θ ⊆ ℝK and that there is a unique β0 ∈ Θ that describes the true probability model generating the asset price data.

In this case, we can take LT(β) to be our sample criterion function— called the likelihood function of the data—and obtain the maximum likelihood (ML) estimator

by maximizing LT(β). In ML estimation, we start with the joint density function of evaluate the random variable at the realization comprising the observed historical sample, and then maximize the value of this density over the choice of β ∈ Θ. This amounts to maximizing,

-17-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Empirical Dynamic Asset Pricing: Model Specification and Econometric Assessment
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 480

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.