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Please use this identifier to cite or link to this item: http://hdl.handle.net/1842/1836

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Title: Empirical Likelihood as an alternative to GMM estimation in the area of asset pricing
Authors: Gonzalez, Angelica
Issue Date: 2005
Publisher: Management School and Economics. The University of Edinburgh
Series/Report no.: CFMR
05.04
Abstract: This paper proposes and analyses Owen’s (1998, 1990, 1991) Empirical Likelihood (EL) as an alternative to the General Method of Moments (GMM) within the Capital Asset Pricing Model (CAPM). We concentrate on the …finite-sample properties, size and power, of their over identifi…cation tests. Our simulation evidence shows that there are no clear advantages in terms of size when the GMM’s over identfi…cation tests based on two-step and continuously updated estimators are compared to that based on the Empirical Likelihood Ratio (ELR) within a Mean-Variance and Three-Moment setting. The three tests have moderate size distortions. However, our …findings illustrate that the ELR over identifi…cation statistic is more powerful in detecting deviations from the null under the alternatives that we analyse.
Keywords: econonics
Empirical Likelihood
Capital Asset Pricing Model
URI: http://hdl.handle.net/1842/1836
Appears in Collections:Business and Management Research Publications

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