Misspecification-Robust Inference in Linear Asset Pricing Models with Irrelevant Risk Factors

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Misspecification-Robust Inference in Linear Asset Pricing Models with Irrelevant Risk Factors

Kan, Raymond - ; Robotti, Cesare - ; Gospodinov, Nikolay - ;

We show that in misspecified models with useless factors (for example, factors that are independent of the returns on the test assets), the standard inference procedures tend to erroneously conclude, with high probability, that these irrelevant factors are priced and the restrictions of the model hold. Our proposed model selection procedure, which is robust to useless factors and potential model misspecification, restores the standard inference and proves to be effective in eliminating factors that do not improve the model's pricing ability. The practical relevance of our analysis is illustrated using simulations and empirical applications..Printed Journal

Ketersediaan

Call Number	Location	Available
RFS2707	PSB lt.dasar - Pascasarjana	1

Penerbit	Oxford Oxford University Press.,
Edisi	-
Subjek	GMM Estimation Asset pricing models model misspecification lack of identification
ISBN/ISSN	8939454
Klasifikasi	-
Deskripsi Fisik	-
Info Detail Spesifik	-
Other Version/Related	Tidak tersedia versi lain
Lampiran Berkas	Tidak Ada Data