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Efficient estimation of general dynamic models with a continuum of moment conditions

Carrasco, M. and Chernov, Mikhail and Florens, Jean-Pierre and Ghysels, E. (2007) Efficient estimation of general dynamic models with a continuum of moment conditions. Journal of Econometrics, 140 (2). pp. 529-573. ISSN 0304-4076

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Identification Number: 10.1016/j.jeconom.2006.07.013

Abstract

There are two difficulties with the implementation of the characteristic function-based estimators. First, the optimal instrument yielding the ML efficiency depends on the unknown probability density function. Second, the need to use a large set of moment conditions leads to the singularity of the covariance matrix. We resolve the two problems in the framework of GMM with a continuum of moment conditions. A new optimal instrument relies on the double indexing and, as a result, has a simple exponential form. The singularity problem is addressed via a penalization term. We introduce HAC-type estimators for non-Markov models. A simulated method of moments is proposed for non-analytical cases.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-econom...
Additional Information: © 2007 Elsevier
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C13 - Estimation
C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C22 - Time-Series Models
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
Sets: Departments > Finance
Collections > Economists Online
Date Deposited: 10 Nov 2011 10:14
Last Modified: 24 Jan 2013 16:06
URI: http://eprints.lse.ac.uk/id/eprint/39394

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