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Estimation of linear regression models by a spread-tolerant estimator

Linton, Oliver (2004) Estimation of linear regression models by a spread-tolerant estimator. Discussion paper, 512. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Abstract

We investigate a class of estimators for Linear Regression models where the dependent variable is subject to bid-ask censoring. Our estimation method is based on a definition of error that is zero when the predictor lies between the actual bid price and ask price, and linear outside this range. Our estimator minimizes a sum of such squared errors; it is non-linear, and indeed the criterion function itself is non smooth. We establish its asymptotic properties using the approach of Pakes & Pollard (1989). We compare the estimator with mid-point OLS.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2004 The Author
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 512
Date Deposited: 06 Aug 2009 13:28
URL: http://eprints.lse.ac.uk/24763/

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