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Jump Regressions, Jia Li, Viktor Todorov, George Tauchen
Jump Regressions, Jia Li, Viktor Todorov, George Tauchen
Research Collection School Of Economics
We develop econometric tools for studying jump dependence of two processes from high-frequency observations on a fixed time interval. In this context, only segments of data around a few outlying observations are informative for the inference. We derive an asymptotically valid test for stability of a linear jump relation over regions of the jump size domain. The test has power against general forms of nonlinearity in the jump dependence as well as temporal instabilities. We further propose an efficient estimator for the linear jump regression model that is formed by optimally weighting the detected jumps with weights based on the …
Nonparametric Testing For Anomaly Effects In Empirical Asset Pricing Models, Sainan Jin, Liangjun Su, Yonghui Zhang
Nonparametric Testing For Anomaly Effects In Empirical Asset Pricing Models, Sainan Jin, Liangjun Su, Yonghui Zhang
Research Collection School Of Economics
In this paper, we propose a class of nonparametric tests for anomaly effects in empirical asset pricing models in the framework of nonparametric panel data models with interactive fixed effects. Our approach has two prominent features: one is the adoption of nonparametric functional form to capture the anomaly effects of some asset-specific characteristics and the other is the flexible treatment of both observed/constructed and unobserved common factors. By estimating the unknown factors, betas, and nonparametric function simultaneously, our setup is robust to misspecification of functional form and common factors and avoids the well-known "error-in-variable" problem associated with the commonly used …