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Constrained indirect inference estimation

Calzorali, Giorgio and Fiorentini, Gabriele and Sentana, Enrique (2001) Constrained indirect inference estimation. Discussion paper, 384. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Identification Number: 384

Abstract

We develop generalised indirect inference procedures that handle equality and inequality constraints on the auxiliary model parameters. We also show that the asymptotic efficiency of such estimators can never decrease by explicitly taking into account Lagrange multipliers associated with additional equality constraints, regardless of whether the restrictions are correct. Furthermore, we discuss the variety of effects on efficiency that can result from imposing some constraints on the parameters of a previously unrestricted model. As examples, we consider MA(1) estimated through AR(1), AR(1) through MA(1), and stochastic volatility through GARCH with Gaussian or t distributed errors.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2001 The Authors
Subjects: 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
Date Deposited: 28 Aug 2009 14:32
Last Modified: 27 Feb 2014 15:36
URI: http://eprints.lse.ac.uk/id/eprint/25061

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