Gospodinov, Nikolay and Otsu, Taisuke 
ORCID: 0000-0002-2307-143X
(2012)
Local GMM estimation of time series models with conditional moment restrictions.
Journal of Econometrics, 170 (2).
pp. 476-490.
ISSN 0304-4076
Abstract
This paper investigates statistical properties of the local generalized method of moments (LGMM) estimator for some time series models defined by conditional moment restrictions. First, we consider Markov processes with possible conditional heteroskedasticity of unknown forms and establish the consistency, asymptotic normality, and semi-parametric efficiency of the LGMM estimator. Second, we undertake a higher-order asymptotic expansion and demonstrate that the LGMM estimator possesses some appealing bias reduction properties for positively autocorrelated processes. Our analysis of the asymptotic expansion of the LGMM estimator reveals an interesting contrast with the OLS estimator that helps to shed light on the nature of the bias correction performed by the LGMM estimator. The practical importance of these findings is evaluated in terms of a bond and option pricing exercise based on a diffusion model for spot interest rate.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.journals.elsevier.com/journal-of-econom... |
| Additional Information: | © 2012 Elsevier |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| 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 |
| Date Deposited: | 16 Oct 2012 15:44 |
| Last Modified: | 01 Nov 2024 05:23 |
| URI: | http://eprints.lse.ac.uk/id/eprint/46835 |
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