Questions tagged [gmm]

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R resources for GMM estimation and testing of multifactor asset pricing models

Has anyone seen R script for GMM estimation and testing of asset pricing models such as Fama-French 3-factor or similar? Ideally, I would like to have R scripts corresponding to Cochrane "Asset ...
Richard Hardy's user avatar
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GMM estimation of the CAPM allowing for time-varying expectation of market's excess return

With time-constant expected value of market's excess return, we can estimate the CAPM using GMM as follows. Equation $(12.23)$ in Cochrane "Asset Pricing" (2005) section 12.2 (p. 241) says ...
Richard Hardy's user avatar
1 vote
1 answer
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Incorporating idiosyncratic risk as a pricing factor with GMM

Suppose we are given a dataset with $T$ time periods and $N$ assets or portfolios. We are interested in estimating and testing an augmented CAPM or a multifactor model with an additional factor: the ...
Richard Hardy's user avatar
2 votes
2 answers
172 views

GMM estimation of the CAPM: why not include sample mean of the market excess return as a moment?

I am trying to wrap my head around GMM estimation of a single factor model such as the CAPM. I started by asking How come the cross-sectional CAPM equation produces $N$ moment conditions (not $1$)? ...
Richard Hardy's user avatar
2 votes
1 answer
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How come the cross-sectional CAPM equation produces $N$ moment conditions (not $1$)?

Reading Cochrane "Asset Pricing" (2005) section 12.2 (p. 241), I got lost in the derivation of the GMM estimator for the single-factor model. Equation $(12.23)$ says the moments are $$ g_T(b)...
Richard Hardy's user avatar
1 vote
0 answers
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2-step system-GMM for static panel models?

Could we use the 2-step system generalized method of moment (GMM) for static regression models? As I know, 2-step system GMM is designed for dynamic panel data models but I see many papers use it for ...
Tina Ha Dinh's user avatar
5 votes
0 answers
164 views

How to decompose the variance of log book-to-market ratio into components using GMM in Vuolteenaho (1999)?

I'm reading Vuolteenaho(1999). In this article, the author investigates whether the variation in stock market valuation level is driven by expected future cash-flows or by expected returns. In part V....
Gödel's user avatar
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1 vote
0 answers
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Generalized method of moments concept in CAPM testing

In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ...
anw's user avatar
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6 votes
0 answers
476 views

GMM time-series regression factor model with factors that are not returns

Factor models with factors that are not returns are usually estimated and tested by cross-sectional regressions. However, there is a way to use time-series regression to estimate and test the model. ...
TrueTears's user avatar
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