Publication type: | Article in scientific journal |
Type of review: | Peer review (publication) |
Title: | Estimating Beta pricing models with or without an Intercept : results from simulations |
Authors: | Bänziger-Aiba, Armin Gramespacher, Thomas |
Published in: | International Research Journal of Finance and Economics |
Volume(Issue): | 2015 |
Issue: | 140 |
Page(s): | 76 |
Pages to: | 82 |
Issue Date: | 2015 |
Publisher / Ed. Institution: | INFE |
ISSN: | 1450-2887 |
Language: | English |
Subjects: | Simulation study; Two-pass approach; Asset pricing econometrics; Cross-section regression |
Subject (DDC): | 330: Economics |
Abstract: | The two-pass (cross-sectional) regression approach is widely used for estimating risk premia and testing factor pricing models. We investigate on two problems of the methodology, namely the error-in-variable bias and the large standard errors of the estimates. To mitigate these effects, we propose to run the first- and/or second-pass regression without an intercept (constant), hence imposing the theoretical restriction of the factor pricing model. We use simulations to assess the (finite sample) properties of estimators in the different regression specifications. Findings show that the error-in- variables bias and the standard errors of the estimates can be reduced considerably. Nevertheless, the standard errors remain substantial, even in large samples, so that statistical inference remains a challenging endeavour. |
URI: | https://digitalcollection.zhaw.ch/handle/11475/12734 |
Fulltext version: | Published version |
License (according to publishing contract): | Licence according to publishing contract |
Departement: | School of Management and Law |
Appears in collections: | Publikationen School of Management and Law |
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Bänziger-Aiba, A., & Gramespacher, T. (2015). Estimating Beta pricing models with or without an Intercept : results from simulations. International Research Journal of Finance and Economics, 2015(140), 76–82.
Bänziger-Aiba, A. and Gramespacher, T. (2015) ‘Estimating Beta pricing models with or without an Intercept : results from simulations’, International Research Journal of Finance and Economics, 2015(140), pp. 76–82.
A. Bänziger-Aiba and T. Gramespacher, “Estimating Beta pricing models with or without an Intercept : results from simulations,” International Research Journal of Finance and Economics, vol. 2015, no. 140, pp. 76–82, 2015.
BÄNZIGER-AIBA, Armin und Thomas GRAMESPACHER, 2015. Estimating Beta pricing models with or without an Intercept : results from simulations. International Research Journal of Finance and Economics. 2015. Bd. 2015, Nr. 140, S. 76–82
Bänziger-Aiba, Armin, and Thomas Gramespacher. 2015. “Estimating Beta Pricing Models with or without an Intercept : Results from Simulations.” International Research Journal of Finance and Economics 2015 (140): 76–82.
Bänziger-Aiba, Armin, and Thomas Gramespacher. “Estimating Beta Pricing Models with or without an Intercept : Results from Simulations.” International Research Journal of Finance and Economics, vol. 2015, no. 140, 2015, pp. 76–82.
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