Estimating and Testing Beta Pricing Models: Alternative Methods and their Performance in Simulations / Jay Shanken, Guofu Zhou.

Format:

Book

Author/Creator:

Shanken, Jay.

Contributor:

National Bureau of Economic Research.

Zhou, Guofu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12055.

NBER working paper series no. w12055

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Estimating and Testing Beta Pricing Models

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

In this paper, we conduct a simulation analysis of the Fama and MacBeth (1973) two-pass procedure, as well as maximum likelihood (ML) and generalized method of moments estimators of cross-sectional expected return models. We also provide some new analytical results on computational issues, the relations between estimators, and asymptotic distributions under model misspecification. The GLS estimator is often much more precise than the usual OLS estimator, but it displays more bias as well. A "truncated" form of ML performs quite well overall in terms of bias and precision, but produces less reliable inferences than the OLS estimator.

Notes:

Print version record

February 2006.